ANALYSIS P22 TOYS P36 PLUS

How to fix Return to the What did you

our crisis grand old days learn this year?
of capitalism of driving THE 2018 QUIZ P38

MoneyWeek
MAKE IT, KEEP IT, SPEND IT 28 DECEMBER 2018 | ISSUE 928 | £3.95

Spoilt for
choice
Our top tips for 2019
Page 24

BRITAIN’S BEST-SELLING FINANCIAL MAGAZINE MONEYWEEK.COM

 28 December 2018 | Issue 928
MoneyWeek
Britain’s best-selling financial magazine

From the editor-in-chief...

“Rising interest
rates and
quantitative
tightening (QT)
are not the
problem. They
are the inevitable consequence
of the problem. The Federal
Reserve made a deal with the
devil to postpone the necessary
pain when it cut rates to zero
and launched QE (quantitative
easing). The devil has finally A Faustian monetary pact
showed up to collect. Welcome
to hell!” So said US analyst Peter “With QE, the Federal Reserve made a deal miner. Some reflect the usual
Schiff in late December, as Fed
boss Jerome Powell declined to
with the devil. He has finally come to collect” preoccuaptions
produce any Christmas cheer for investors
(see page 31) and it became clear that,
barring a miracle, US stocks were about
to see their worst December since 1931
(see page 4). But if Schiff is right – that
QE just postponed the pain of the 2008
crisis – might QT make 2018 look almost
rewarding next to 2019?
The latest note from James Montier at
US asset manager GMO suggests it might.
US valuations in particular are so high,
he says, that “to believe that US equities
are going to generate a ‘normal’ return
from these levels, you have to believe
some quite extraordinary things”. That
profits will rise far beyond today’s already
extended levels (see page 22 for more on
why this could be possible); that price/
earnings ratios will soar to levels above
those at the height of the technology,
media, telecommunications (TMT)
bubble; or that growth is going to reach
“unprecedented levels”. If you don’t believe Brexit isn’t so bad? Perhaps you should
any of those, you should see US equities
as a whole not as a default investment (as
most investors do) but as an “an expensive
and risky asset” to avoid.
We agree with Montier – we’ve been
suggesting you shift out of the US for some Then buy China. All these things are
time, and we still think that’s a wise idea. possible. A very Happy New Year to all
But while we are nervous about many
other things too (Brexit failing, China
being unable to cope with lower growth,
trade wars, Italy’s relationship with the
European Union, and so on) we are loath
to be too bearish on all markets. The rising
importance of China and other emerging
markets (now 40% of global GDP);
high global debt levels; the
productivity potential embedded
in technology; the volatile oil
price; and the uncertainty
around the normalisation of
monetary policy, all make
today’s world so non-binary,
that making much in the way of
precise forecasts is pointless.
With that in mind, turn to
our cover story on page 24.
There you will find all sorts of
exciting ideas. Some are niche
– a small biotech and a helium
of our writers
(inflation and gold for example –
we do worry about stagflation). But others
are interesting bets on the possibility that
the misery consensus is wrong. What if
buy UK small caps or shares in Next.
What if the dollar weakens rather than
strengthens? Perhaps you should buy
emerging markets and India in particular.
What if a full-blown trade war is averted?
our readers, and we’ll see you again in
2019, on 11 January.
Merryn Somerset Webb
editor@moneyweek.com

Good week for:

A range of Vladimir Putin calendars, priced from ¥1,404 with tax
(£10), has proved to be a surprising hit at Loft, a chain of shops in
Japan. According to Loft, Putin has pushed Japanese actor Kei
Tanaka’s calendars into second place, and Yuzuru Hanra, a two-
time figure-skating champion, into third. Japan’s Livedoor News
attributed the sales to “Putin fans” among young women,
attracted to the Russian president’s raw masculinity.
Others cited humour.

Ian Lewis awoke last week in Port Talbot to find

©Getty Images

Take that: Page lost out to
ex-boy band singer Williams
Loser of the week
Led Zeppelin guitarist Jimmy Page has
lost a five-year battle to stop his
neighbour, singer Robbie Williams, from
building a basement swimming pool.
Page argues vibrations from the work at
Cover illustration: Howard McWilliam. Photos: Ryan ToysReview
anonymous graffiti artist Banksy had left a mural on his
garage wall depicting a boy in hat and gloves catching
ashes from a burning bin behind him. Banksy later confirmed
he was behind the artwork, which could be worth a fortune.
The artist’s Girl With Balloon sold for £860,000 at auction in
October.
Bad week for:

A petition calling for Disney to drop its trademark over the

Woodland House, Williams’ Grade
phrase “hakuna matata” (meaning “no worries” in Swahili,
II-listed £17.5m Kensington mansion,
as the song in the 1994 animated film The Lion King
would damage his own Grade I-listed
explains), threatens to overshadow the release of a live
home, Tower House, built in 1781. The
action version of the film next summer. “Growing up in
council said the work could go ahead
Zimbabwe, I always had an understanding that a culture’s
pending independent assurances, but
language was its richness”, Shelton Mpala, an activist who
Williams may have to forfeit a bond if
started the petition, told the BBC.
conditions are breached or damage
caused. Builders working for Williams
Five-times F1 world champion Lewis Hamilton sparked outrage in
have previously been ordered to pay
Stevenage, Hertfordshire, after he initially referred to his home
£4,670 for breaching noise regulations.
town as “the slums”. The gaffe, made during an interviewing on
Page bought his home for £350,000 in
©Walt Disney

the BBC’s Sports Personality of the Year awards programme, was

1972 from actor Richard Harris, seeing
made worse by the revelation in The Sunday Times that his
off a rival bid from David Bowie.
childhood home is now worth £1m.
moneyweek.com 28 December 2018 MoneyWeek
4 Markets

Money printing turns to money burning

This was meant to be the year that the
lengthy bond bull market finally turned Ten-year US Treasury yields (%)
into a full-blown bear market. And for
much of the year, markets followed the 4.0
script. Concerns about rising inflation and 3.8
the Federal Reserve’s gradual retreat from
monetary stimulus saw bond yields rise 3.6
steadily (and thus prices fall). Yet market 3.4
jitters throughout the year have, in the
past six weeks or so, metamorphosed into
3.2
full-blown fear of a pending slowdown or 3.0
even recession, sending bond yields down 2.8
sharply. And the latest decision on interest
rates from the Fed provided no comfort to 2.6
markets – indeed, it supplied the impetus 2.4
for the latest sell-off.
2.2
Demise of the Greenspan put 2.0
Jerome Powell took over from Janet Yellen
as chairman of the Fed on 5 February this 1.8
year. That same day, the S&P 500 fell by 1.6
4% – the worst one-day hit the US market
1.4.

had taken since 2011. Although the US
market recovered to hit new highs later in
the year, it was a clear sign of what was
already troubling investors – what would
happen as monetary policy moved from
being ultra-loose to a gradual tightening?
Powell took over as the Fed was starting
to reverse quantitative easing (printing
money to buy government bonds). But that
couldn’t remain the case for good. And it fell
to Powell to oversee the start of the reversal
of quantitative easing (QE) – or as it’s become
known, quantitative tightening (QT). Put
simply, QE adds money to the market. The
central bank prints cash and buys (mostly,
although not exclusively) government bonds.
In turn, the people who would have bought
those bonds, or who owned those bonds,
buy other assets instead.
QT is the opposite. The Fed takes
cash out of the market by shrinking the
quantity of government bonds it holds.
2009 2010 2011 2012 2013
When a bond matures and the Fed receives
the cash, it simply destroys it rather than
reinvesting the money in a fresh bond. The
Fed is currently destroying around $50bn a
month in this way, and in its final interest-
rate setting meeting of the year last week,
Powell confirmed that it plans to continue
at that pace all through next year.
Longer-term perspective
This in turn is what has rattled markets.
While investors had expected the Fed to
raise interest rates (which it did, by 0.25
percentage points to a range of 2.25% to
2.5%), they had also hoped for a “dovish”
message, given the recent slide in the stock
market. Yet, while officials indicated there
would be two rather than three interest
rate hikes next year, the overall message
©iStockphotos
2014 2015 2016 2017 2018
was nowhere near as soothing as investors
had hoped. Hence the “flight to safety”
rally enjoyed by US Treasuries.
So what next? As the chart above
shows, ten-year yields are still significantly
higher than at the start of 2018. And given
Donald Trump’s tax cuts mean the US
government will run a huge deficit next
year – about 4.7% of GDP – which in turn
means more government borrowing and
a much larger supply of US Treasuries for
investors to soak up, it would be logical to
expect yields to rise in 2019.
However, if fears of recession or over-
tightening by the Fed grow, the appeal
of so-called “risk-free” Treasuries may
prevail. On page 6 we look at one key
recession indicator – the yield curve – to
watch over the year ahead.

Britain is in the bargain basement

Our stockmarket has been an
international pariah this year –
and the exodus is gathering
pace, says Daniel Grote on
Citywire. The latest monthly
Bank of America Merrill Lynch
survey of global fund
managers revealed their
allocation to UK stocks had
fallen to a near-record low.
British investors are just as
negative.
An index of UK investor
confidence by Hargreaves
Lansdown suggests their
mood is worse than during the
financial crisis. According to
the Investment Association,
£10bn has been yanked out of
UK equity funds since the
referendum in 2016, while
£12.8bn has been located to
City gloom is starting to look overdone
if there ever was one,” says
Investor Chronicle’s Mark
Robinson. But the gloom is
starting to look overdone.
Brexit is the key near-term
problem, but the shape of our
spring, so investors put off by
the uncertainty should then be
inclined to take another look at
the UK market, as Alex Wright
of the Fidelity Special Values T
rust notes in the Investors
no-deal Brexit is still not
widely thought likely, but in
any case, valuations have
reached the point where
plenty of bad news is already
in the price. The FTSE 100
offers a forward dividend yield
of 4.9%, says Hamish McRae in
the Evening Standard. The
yield has very rarely been
above 4% in the past 30 years.
And the fundamentals are
solid, with the labour market
bolstering wages, which
bodes well for consumption,
and UK corporate profits (the
mid-caps and blue-chips
combined) reaching an all-
time high in the year to
November, according to the
Share Centre. The upshot?
Next year could well be a
©iStockphotos

bond funds in the same time future relationship with the EU Chronicle. much better one for UK shares
frame. “That’s a risk-off trade will be much clearer by the Meanwhile, a harmful than 2018.

MoneyWeek 28 December 2018 moneyweek.com


Emerging markets: ‘buy of the decade’
This time last year, investors
in emerging markets had
enjoyed an 85% increase in the
benchmark MSCI Emerging
Markets index over two years,
and were looking forward to a
hat trick. They didn’t get one.
After peaking in late January,
the index slipped back into a
bear market, losing nearly a
quarter between late January
and this week. Emerging
markets account for most of the
world’s ten worst-performing
equity indices in 2018 to date.
Argentina is at the bottom
©Alamy
of the global league, with its
Merval index losing 52%
in dollar terms this year.
It was forced to call in the
International Monetary Fund
after investors, rattled by high
inflation, fled the country
– sending the currency, the
peso, off a cliff. That made
the country’s dollar debt more
expensive, as did the overall
rise in the dollar. Along with
the high rates required to
temper the currency’s slide, this
squeezed the economy hard.
Turkey suffered a similar
exodus, with its stockmarket
second to last in the table with
a decline of 43%.
Moving on up, we come
to the Shanghai Composite
index, which fell by almost
30%. Signs of a slowdown in
the Chinese economy following
a clampdown on lending
unnerved investors, while the
trade war between the US
and China, and its potential
Viewpoint
“Britons may not be quite the
workaholics… that we thought. Instead
of working more than 1,700 hours a year,
on average, a more accurate figure may
be…1,500 when time off is properly
taken into account (according to the
OECD). If we are working fewer hours,
our output per hour is higher. We are still
less productive than France, Germany
and America, but by less than was
thought. The difference in respect of
France may be 10% rather than 20%, and
the gap with America comes down from
24% to 16%. The smaller productivity
gap is to be welcomed, although it
reduces the force of one argument for
why Britain lags behind other countries
at all: that we spend too much time
working and that our efforts are subject
to the law of diminishing returns. Even
when our working hours are adjusted
downwards, we still have some catching
up to do.”
David Smith, The Sunday Times
moneyweek.com
Markets
China and the US are patching up relations
ramifications, were a heavy
blow to confidence.
Emerging markets, notably
Asia’s, are typically more
dependent on trade than
industrialised countries, with
bigger domestic economies.
This helps explain why Korea’s
Kospi index is also near the
bottom of the table. It tracks
the blue chips of one of the
world’s most open economies.
Bad apples
This turbulent year, however,
doesn’t mean emerging markets
in general are in crisis. It’s just
a case of a rotten apple or two.
The most striking feature of the
league table is that the countries
who did worst are battling
specific problems. Investors
began to question whether
the Argentinian central bank
really could contain inflation,
while Turkey’s autocratic leader
n Trump bump went to profits, not workers
Annual percentage change
25%
Wages
After-tax profits
20%
15%
10%
5%
0%
Jan, 17 July
Recep Tayyip Erdogan has
been trying to bully the central
bank into cutting interest rates,
even though inflation is still at
a 15-year high of 23%.
Both Turkey and Argentina
also have relatively high levels
of dollar debt, making them
especially vulnerable to higher
US interest rates and dollar
appreciation.
Not too long ago, all
emerging markets had these
problems; now, very few do. As
Fortune’s Shawn Tully points
out, countries comprising 80%
of the MSCI index on average
hold the equivalent of less than
10% of GDP in dollar debt.
Most emerging markets are
much better managed now,
with inflation under control
and government debt averaging
less than 50% of GDP,
compared with 80%-90% in
Europe. The long-term story,
Jan, 18 July
5
moreover, remains compelling.
Young workforces and
emerging middle classes should
power fast growth for years
to come. Moreover, emerging
markets account for 40% of the
world’s growth yet only 12% of
global stockmarket value.
What to expect in 2019
Near-term prospects,
meanwhile, appear to be
improving. Emerging-market
growth has cooled to roughly
4.2% year on year as the
developed world and China
have slowed. But with China
set to allow banks to lend more
and run a larger fiscal deficit,
GDP should come in at around
6.3% this year, only a small dip
from this year’s 6.6%, reckons
Deutsche Bank. And as Mark
Williams of Liontrust Asia
Income notes in the Investors
Chronicle, dollar strength
should abate this year because
fewer US interest-rate rises are
on the cards. On the trade front
“there seems to be an honest
attempt to patch up relations
between China and the US”.
Even if 2019 doesn’t prove a
better year, however, emerging
markets are already so cheap it
barely matters, reckons Tully.
Rampant pessimism means
they are on a cyclically-adjusted
price/earnings ratio of a mere
12.5, compared with America’s
31. The upshot? As Rob Arnott
of Research Affiliates told
Fortune, they are “the buy of
the decade”.
Last year’s stimulus package
from the Trump administration,
comprising corporation tax cuts
and higher spending, has
certainly boosted US growth,
as Jason Furman points out in
The Wall Street Journal. GDP
rose by around 3% in 2018, 0.5%
more than last year. But
business investment has
slipped recently, “undermining
claims the tax cuts would have a
large and immediate impact on
investment”. The money hasn’t
gone to workers either – wages
have only risen very gently on
an annual basis while net profits
have soared. Many companies
have used the savings to buy
back shares. The budget deficit,
meanwhile, has expanded to
3.8% of GDP, “a nearly
unprecedented figure” for an
economic recovery in
peacetime.
28 December 2018 MoneyWeek
6 Shares
The most important charts of the year
Here are six charts we’ll be keeping an eye on during 2019. John Stepek reports
The tech bellwether
Of all the FAANG Figures in $
2000
stocks (Facebook, 1900
Amazon, Apple, Netflix 1800
and Google-parent 1700
Alphabet), online retail 1600
1500
giant Amazon is the
1400
one we pay particular 1300
attention to. Along with 1200
Apple, Amazon briefly J F
became a $1trn stock
this year. Why is it worth
watching?
Of all the tech stocks, it’s
seen as the ultimate disruptor
– the minute Amazon turns its
attention to a new industry,
companies across the sector
plunge. It’s also seen as a
“no-brainer” stock by fund
managers – you won’t get fired
for owning Amazon.
The oil price
The price of oil (in this Figures in $ per barrel
85.0
case, measured by the
European benchmark, 80.0
Brent crude) has had a 75.0
real roller-coaster ride 70.0
this year. For the first 65.0
nine months of the year, 60.0
oil enjoyed a steady
55.0
recovery from the 2014 J F
crash, helped by cuts
in production by Saudi
Arabia and Russia. Yet as
markets peaked in October,
so did the oil price. And, like
markets since then, oil has
plunged precipitously.
On the one hand the collapse Saudi Arabia as the world’s
points to fears of slower global
growth (most probably driven
by China’s current struggles).
So it is not exactly a healthy
The recession indicator
Ten-year US yield – Two-year yield (”spread”)
The threat of an 0.75
“inverted yield curve” 0.65
0.70
has been in the headlines 0.60
0.55
a great deal. The yield 0.50
0.45
curve looks at borrowing 0.40
costs (bond yields) over 0.35
0.30
time. Usually, a ten-year 0.25
0.20
bond should yield more 0.15
0.10 J F M A M J J A S O N
than a two-year bond
because lenders expect
more compensation for lending
over longer periods. When the
US yield curve inverts (when
long-term yields fall below
short-term yields), it suggests a
recession is coming. This chart
indicates the gap (“spread”)
between the ten-year and two-
year US Treasuries. When it
turns negative – not far away
now – the curve has inverted.
We update on these charts and several others every Saturday in our free email newsletter, Money Morning. If you don’t receive it yet, go to moneyweek.com/money-morning-signup
MoneyWeek 28 December 2018
Amazon
M A M J
2018
J A S O N D
So it’s interesting to see
that even Amazon appears
to have been abandoned in
the “buy-the-dip” mentality
during the stock slide of recent
months. It may be a sign that
the shift from expensive “jam
tomorrow” growth stocks
to more value-orientated
investments is going to continue
as monetary policy tightens.
Brent crude oil
M A M J
2018
J A S O N D
indicator. Yet on the other
hand, cheaper oil is good for
consumer economies, acting
as a tax cut. While this is no
longer as true as it once was
of the US, which has eclipsed
top producer thanks to shale,
it’s certainly true of the likes
of Japan, India, and of course,
the UK.
The yield curve
D J F
2018
That said, while an inverted
yield curve is reliable (with only
one false alarm in the past 60
years), it’s not very timely. On
average, recession follows two
years after the initial inversion,
but the small sample ranges
from six months to more than
30 months – and it also says
very little about how stocks will
behave in the interim period.
The next big thing Bitcoin
After plunging from a Figures in $ per coin
1800
peak of near $20,000 1600
in December 2017 1400
to below $4,000 this 1200
month, it would appear 1000
800
at first glance bitcoin 600
had a catastrophic year. 400
Yet this is not the first 200
80%-plus bear market J F M A M J
2018
J A S O N D
the digital currency has
experienced. Believers burned both by the bitcoin
in the cryptocurrency and bubble and the myriad of far
the much-hyped blockchain flakier cryptocurrencies out
revolution are hoping it’s not there suggests bitcoin will
the last. take a long time to find its feet
We haven’t seen any of again, if it ever does. That said,
the innovations promised by it’s too soon to write off any
blockchain evangelists make a asset that has a clear use case
dent in the popular psyche as for evading capital controls in
yet. And the number of first- authoritarian economies such
time investors who have been as Venezuela and China.
Real money Gold
MoneyWeek has long Figures in $/oz
1360
recommended that you 1340
hold a small part (5% to 1320
10%) of your portfolio 1300
in gold. Why? Because it 1280
is a genuine diversifier. 1260
1240
Gold behaves differently 1220
to most of the other 1200
assets you might own. J F M A M J
2018
J A S O N D
And this feature of gold
has been very apparent of equity markets. However,
this year. as signs of stress in global
The gold price shot up financial markets started to
in January as investors bet build over the summer, gold
on rising inflation. It then found its low point for the year.
struggled as the Federal And with US stockmarkets
Reserve talked tough and falling hard over the past couple
continued to hike interest rates, of months, gold appears to have
while continued gains in share recovered its poise. Suffice it to
prices meant investors preferred say, if you don’t already own it,
to stick with the excitement we suggest you get some.
King dollar US dollar index
The US dollar is the 97.0
world’s most important 96.0
currency – what’s 95.0
known as the global 94.0
93.0
reserve currency.
Central banks around 92.0 91.0
the world maintain 90.0
reserves of dollars, and 89.0
M A M J J A S O N D
the currency is vital 2018
to cross-border trade.
If a country ends up being when the dollar appreciates
locked out of the dollar – when it becomes more
economy (which in effect, is expensive – monetary policy
what happens when the US becomes tighter around the
imposes financial sanctions world. The steadily rising dollar
on the likes of Russia or Iran, this year is one major reason
for example), it becomes very for the bear market in emerging
hard to participate in the global markets, for example. If the
financial system. In short, dollar turns around and starts
everyone needs dollars. to weaken, it would probably
This importance means that be a good sign for markets.
moneyweek.com

City talk
l We hear nothing but horror
stories about the high street,
says Simon English in the
Evening Standard. Sports
Direct boss Mike Ashley
reckons big retailers face
being “smashed to pieces”.
So shareholders in British
banks may want to know just
how exposed our main banks
are to this “fast-moving
disaster zone”. Unfortunately,
“no-one knows”. You’d think it
would be easy to work out the
value of loans HSBC, Barclays,
Royal Bank of Scotland and
Lloyds have paid out to
retailers, and then make an
educated guess as to what
percentage might go bad. But
if you comb through their
books, you find that they don’t
isolate retail as a sector. And if
you ask, all you get is “quiet
shuffling of feet”. This bodes
ill, and prompts the thought
that they are sitting on
information that could cause
panic if it gets out. But
investors can’t gauge the
value of banks’ shares without
some idea of their retail
exposure. They “should be
demanding to know right
now”.
l Altria’s $12.8bn “vaping
punt” tastes bitter, says
Antony Currie on
BreakingViews. The tobacco
giant, which makes Marlboro,
has bought 35% of e-cigarette
maker Juul Labs. You can see
the strategic rationale. Altria’s
sales have flatlined as
cigarette volumes have fallen
by 6% in the first nine months
of the year. And despite its
efforts to enter the vaping
market, Juul has blown smoke
in its face with its own soaring
popularity. By Altria’s own
estimates, Juul has a 30%
share of the e-cigarette
market, while a Wells Fargo
analysis of Nielsen data puts it
at three-quarters. “That
makes Juul a catch”, but the
price is eye-watering. It values
the three-year-old company at
$38bn – more than twice as
much as a funding round six
months ago implied. And
there is “no guarantee” that
Juul’s growth trajectory will
endure.
moneyweek.com
Shares 7
Pharma ditches the Panadol
GSK and Pfizer are merging their consumer-healthcare businesses. GSK can
now concentrate on its drugs pipeline. Alex Rankine reports
Pfizer and GlaxoSmithKline (GSK) have finally
done a deal, says Carol Ryan in The Wall
Street Journal. “And it’s a big one.” The two
pharma giants plan to combine their consumer
healthcare businesses in a joint venture.
GSK will have a 68% stake in the resulting
behemoth, which will be the world’s largest
over-the-counter drug company and boast
brands such as Panadol, Advil and Sensodyne
toothpaste. The plan is to demerge the company
within three years through a separate listing on
the London Stock Exchange.
The promise of a “big windfall by 2022”
will be a relief to many British investors as it
enables GSK chief executive Emma Walmsley
to “guarantee the company’s dividend this year
and next”. GSK management has long resisted
calls to demerge its “reliable consumer products
business” from the more “volatile prescription
pharmaceutical side”, notes Ben Marlow in The
Daily Telegraph. Yet it now looks like Walmsley GSK faces two key clinical trials in 2019
has “caved into shareholder pressure”, says
Marlow. get out of a low-margin, fiercely competitive
The reasoning behind the status quo was marketplace.
always that GSK was more resilient with the “GSK has evolved more times than the
consumer and vaccines divisions supporting the malaria parasite over the centuries,” writes Jim
riskier pharmaceutical operation through bad Armitage in the Evening Standard. Bravo to
times. Walmsley held senior roles at the group’s Walmsley for reshaping GSK into a “far more
consumer arm for seven years before taking the sensible structure”. “Pragmatic” restructuring is
top job. Her pragmatic decision to spin it off all very well, says Nils Pratley in The Guardian,
means that “at least no-one can accuse her of but GSK desperately needs to produce “a fatter
sentimentality”. pipeline of new drugs”. This is the “main worry
hanging over” the company, and a key reason
Back to the lab the share price has traded sideways for a decade.
Drugmakers once “envisioned controlling every The Pfizer deal is a “step in the right
corner of home medicine cabinets”, but the latest direction”, liberating the pharmaceutical
deal is a sign that pharmaceutical operators are business from the “funding straightjacket” of
“slowly turning away from the grocery store and generous dividend payments and freeing up cash
back to the laboratory”, say Timothy Annett and to spend on new drug development. Yet without
James Paton for Bloomberg Quint. The growing drug breakthroughs, “the wider picture hasn’t
power of Amazon and Walmart has driven changed fundamentally”. Shareholders should
down the prices of consumer staples. monitor the news from two important clinical
General Electric was this week reported to trials due next year carefully. “If GSK can clear
have filed to spin off its own health business. those hurdles, it would become easier to believe
It seems that Pfizer and Glaxo are also keen to in Walmsley’s reinvention plan.”
Britain’s ten most-hated shares
These are the ten most Company Sector Short interest Short interest
unpopular firms in the UK, on 20 Dec (%) on 20 Nov (%)
based on the percentage of
stock being shorted (the “short Arrow Global Group Financial Services 12.1 11.69
interest”). Short-sellers aim to Kier Group Construction 11.73 13.98
profit from falling prices, so it
helps to see what they’re Marks & Spencer General Retailers 11.6 11.3
betting against. The list can also
highlight stocks that may Ultra Electronics Defence 10.82 11.86
bounce on unexpected good Plus500 Financial Services 10.42 10.73
news when short-sellers are
forced out of their positions (a Debenhams General Retailers 10.26 9.76
“short squeeze”). New entrant
AA, the motoring group, has Pets at Home Pet Retailers 9.33 12.14
been in short-sellers’ sights for Anglo American Mining 9.18 8.96
some time after a year of profit
warnings, dividend cuts and IQE Semiconductors 8.42 8.87
mounting debts. Its
membership continues to fall. AA Support Services 7.97 NEW ENTRY
28 December 2018 MoneyWeek
8 News
Islamabad
Fitch downgrades Pakistan: Credit-
rating agency Fitch has cut the rating on
Pakistani bonds from B to B- as Islamabad
struggles with twin budget and current-
account deficits. A rating below BB+ is
considered a junk bond, with Pakistani
government debt now on a par with that
of Ukraine. Fitch cited Pakistan’s high
external debt levels and dwindling foreign
currency reserves. Inflation has spiked in
a year in which the Pakistani rupee has
lost about a third of its value. Another
credit-rating firm, Moody’s, has produced
an annual report on Pakistan that makes
for grim reading. It expects GDP growth
to slow to 4.3% next year and says the
economy suffers from “very low global
competitiveness”. The financial crunch
forced Islamabad to turn to the IMF for
assistance in October, but a deal is not
expected until mid-January at the earliest.
In the meantime, the country is relying on
a $6bn loan deal with Saudi Arabia to tide
it over.
London
Inflation hits 20-month low: The Consumer
Prices Index (CPI) measure of inflation fell
to 2.3% year on year in November from
2.4% the previous month. The decline
was driven by a big drop in fuel prices – oil
prices have fallen 30% in sterling terms
Real wage rises will fuel consumption
since October. With annual pay growth
hitting 3.3% in October, workers enjoyed a real-terms wage increase “just in time for
Christmas”, says Andrew Wishart for Capital Economics. Lower oil prices should
see inflation fall back further this month. Indeed, it “could even reach” the Bank of
England’s 2% target before too long. Weaker inflation is also evident in the housing
market. Property prices in London fell at an annual rate of 1.7% in October. Nationally,
house prices fell 0.2% between September and October. On an annual basis property
prices rose 2.7% in October, the slowest rate of expansion in more than five years. The
average UK property is currently worth £231,095. The Bank of England’s monetary
policy committee has opted to hold interest rates at 0.75% this month, with any change
unlikely before Brexit is finalised.

Kinshasa
Elections at last:
Voters in the
Democratic
Republic of
Congo will head
to the polls on
30 December,
two years later than
originally scheduled. The incumbent
president, Joseph Kabila, who has been in
power since 2001, refused to step down
when his second term ended in 2016.
The poll is finally going ahead following
international pressure. The constitution
bars Kabila from seeking another term, so
he has chosen regime loyalist Emmanuel
Ramazani Shadary to run in his place.
The nation of 78 million is rich in mineral
resources such as gold, diamonds and
cobalt but GDP per capita is just $458
and the country has never had a peaceful
transition of power. The country’s natural
wealth is valued at a staggering $24trn,
but most seems to have trickled “into the
bank accounts of those in power”, says
The Guardian. A split opposition and
government repression suggest Shadary
will probably win.

The way we live now: rethinking hygge

The Danish art of cosiness has a dark
side, says David Crouch in The
Guardian. Recent years have seen
Brits rush to emulate the “hygge”
lifestyle, said to have developed as a
way for Danes to get through long,
dark Scandinavian nights with the help
of creature comforts such as hot
drinks and log fires. The trend has
seen retailers marketing snug-creating
essentials such as warm blankets and
candles, but now scientists at
Copenhagen University are warning
those going too far risk not feeling
very hygge at all. Experiments on mice
Cosy... but toxic? have shown that “exposure to
particles from burning candles” can
trigger lung inflammation,
arteriosclerosis and ageing, causing
even greater damage than the same
dose of diesel exhaust fumes. The
Danes burn more candles than anyone
else in Europe, yet previous research
has shown the practice spreads ultra-
fine particles around their homes.
Mads Dalgaard of Danish emergency
management agency BRS advises
people to switch to LED or battery
lighting, though it remains to be seen
whether this health and safety version
of hygge attracts as much interest as
the original.

MoneyWeek 28 December 2018 moneyweek.com


Beijing
Bike-sharing start-up comes
unstuck: Chinese bike-sharing
business Ofo is facing a severe
cash crunch, highlighting
problems in the country’s debt-
fuelled start-up sector. In a letter
to employees this week, CEO Dai
Wei said that he had considered
options including bankruptcy
before concluding that
“surviving is the only way out”.
Ofo’s distinctive dockless yellow
bikes have become a feature of
Chinese cities in recent years,
with the business model
attracting $2.2bn in start-up
funding from the likes of
Alibaba. Yet a bruising battle
News 9
over market share with rivals has
left the firm unable to pay
suppliers. The cash crunch has
been intensified by the fact that
more than 11 million worried
customers are now demanding
the return of their deposits. Ofo’s
“imminent demise” exemplifies
many of the problems with
modern tech investment, says
Tim Bradshaw in the Financial
Times. Businesses focus on
rapid expansion before taking
the time to establish whether
their idea is commercially viable.
It turns out that Ofo’s bikes are
often “vandalised, stolen” or Ofo: wobbling and looking likely to fold
“simply underused”.

Tokyo
EU-Japan trade deal clears final hurdles:
A trade deal between Japan and the
European Union to create the world’s
largest free-trade zone will come into
force on 1 February. Members of the
European parliament backed the new
Economic Partnership Agreement,
signed by prime minister Shinzo
Abe and European
Commission president
Jean-Claude Juncker
(pictured) in July, by
474 votes in favour to
152 against. Japan’s
legislature approved
the accord earlier
this month. The deal,
which will eliminate more
than 97% of tariffs between
the two sides, will cover 600 million
people and almost a third of global
GDP. Japan will slash taxes on EU
agricultural exports in return for
unprecedented market access for its
car makers, says Karan Bilimoria for
Politics.co.uk. Both Japan and the
EU had been negotiating trade deals
with the US before President Trump
pulled the plug on talks, so they
then concentrated on other potential
partners.

Hong Kong Sydney

Hollow IPO crown: It has been a good year for House prices to continue slide: Australia’s housing bubble is expected to continue
initial public offerings (IPOs) in Hong Kong, hissing air into the new year. Reports this month from the OECD, BlackRock
but the outlook for the broader market is not so and CoreLogic all paint a bearish picture. House prices in Melbourne have
rosy. The territory’s stock exchange is expected fallen about 5.5% from their peak, while Sydney has seen a 9.5% slump since
to regain its title as the world’s IPO capital from September last year. Data provider DealLogic says the “mixed to weak”
New York after a year in which it played host to conditions of 2018 will continue, with a prediction prices in the two cities will
blockbuster listings from the likes of smartphone ultimately decline by 15%-20% from their peak. Asset manager BlackRock also
maker Xiaomi. KPMG estimates companies will forecasts the slump to last for another 12-18 months, noting that falling house
have raised about HK$300bn (£30.25bn) by the prices may hit consumer
end of this year, more than double the amount in confidence next year. The
2017. However, the Hang Seng index is down by OECD warned earlier this
14% so far this year and Deloitte predicts IPO month that a “hard landing”
volumes will fall next year to somewhere between in the Australian housing
HK$180bn (£18.5bn) and HK$230bn (£23.19bn). market could imperil
The return of the IPO crown to Hong Kong economic growth that has
disguises a “rickety market”, says Robyn Mak for continued uninterrupted for
Breakingviews. “High hurdles for privatisation, 27 consecutive years. GDP
buyouts and delisting”, designed to protect growth slowed to an annual
minority shareholders, continue to hold back pace of 2.8% last quarter, and
trading volumes, preventing the exchange from a world-beating consumer-
Sydney property has fallen by 9% in just over a year
fulfilling its potential. debt load bodes ill.
moneyweek.com 28 December 2018 MoneyWeek
10
How our bets
fared in 2018
We started the year with
some mixed results,
losing money on Czech
and Italian politics and
calling the outcome of
the Political
Commentator of the
Year awards incorrectly.
We then did well during
the local elections and
made money betting on
the Lewisham East
by-election.
The US midterms
were a high point, but
we wrongly predicted
who Trump would select
as the next Supreme
Court Justice and failed
to anticipate Fiona
Bruce’s (pictured)
appointment as the next
host of the BBC’s
Question Time.
Your performance
this year depended on
whether you followed
this column’s advice
whenever we
recommended splitting
your betting stake
between several
outcomes.
If not, and you simply
opted to stake an equal
Caption here
©BBC
amount on every
individual bet, then 29 of
your 53 settled bets
would have paid off, and
you would have made a
negative return of just
under 10%. However, if
you had structured them
in the way we
suggested, you would
have made a small profit
of 8.3%.
In addition to this
year’s punts, some of
the bets we made before
2018 were finally settled.
These included our
wager on Trump
remaining in the White
House until at least 2019
and there not being a
Scottish referendum
before 2019. Since this
column’s inception in
May 2016 (issue 795)
we’ve made a return of
37% on the 92 settled
combined tips.
The 143 individual
bets, meanwhile, have
made a decent return of
10.9%.
MoneyWeek 28 December 2018
Politics & economics
Our post-Brexit borders
The immigration white paper is a work in progress. Emily Hohler reports
This week, the
government finally
published its long-
delayed “blueprint
for the post-Brexit
immigration system,”
says Helen Warrell in
the Financial Times. The
white paper represents
the “biggest shake-up of
border controls” in 40
years. It ends the priority
given to EU over non-EU
migrants, who will all
come under the same
visa regime in 2021. It
also attempts to balance
Brexit supporters’ call Javid agrees the system will have to be flexible
for immigration controls
while acknowledging recruitment difficulties at a
time of “record” employment.
The timing of Brexit means that the system
won’t be in operation for at least two years. The
government expects it to take effect after the end
of a transition period agreed in Theresa May’s
Brexit deal, December 2020, although this could
be extended for another two years. There is no
explicit mention of a no-deal scenario, although
the Home Office says it will publish a separate set
of contingencies “in due course”.
Unfinished business
In summary, this “key part” of post-Brexit
planning, “remains an unformed and muddled
strategy” that will require another year to
finalise, says The Daily Telegraph. A controversial Telegraph. But she was contradicted by Javid, who
aspect of the plan, a £30,000 annual earnings
threshold for prospective immigrants, is being
put out to consultation for 12 months and will
be subject to some exemptions. The threshold is
intended as a proxy for “skilled” labour, although
the correlation between income and ability is
complex, says The Guardian. The benefits, both
cultural and economic, that immigration brings
EU and Italy postpone hostilities
©Getty Images
Italy’s prime minister Giuseppe
Conte will temper spending
After months of negotiations,
Brussels and Rome’s populist
coalition finally struck a truce
this week, allowing “both sides
to save face”, says Miles
Johnson in the Financial Times.
Rome has agreed to trim its
budget deficit target for 2019
from 2.4% to 2.04% of GDP,
mostly by delaying some of its
“most expansionary measures”
are “often a function
of the aspiration to
earn starting from
a low base”. Home
Secretary Sajid Javid,
whose own bus driver
father arrived in the
UK from Pakistan with
only £1 in his pocket,
knows this only too
well. Not only that, in
any advanced country
such as the UK, with an
ageing population and
“near-full, well-paid”
employment, it is the
©Rex Features
“dirty jobs at the foot
of the labour market
where the need for
people is greatest”, says The Independent. Three-
quarters of EU nationals in Britain earn less than
£30,000.
And while it’s all very well talking of
exemptions from the £30,000 salary cap for
publicly-owned services like the NHS, how can
ministers possibly “divine” what the private sector
needs in the future, asks the Evening Standard.
The fundamental principle of free markets is that
the private sector is better at responding to our
needs than the state. That brings us to the other
big issue: the overall levels of immigration deemed
‘sustainable’. The “tens of thousands” target
from the 2017 Conservative manifesto was gone
from the white paper yet reiterated by Theresa
May in the House of Commons, notes The Daily
insisted there was “no specific target”. To be fair,
as Javid acknowledged, the future system has to
be flexible, says Charlie Cooper in Politico. There
are many reasons for this, not least that the final
rules will be subject to trade negotiations with the
EU and other countries, which are “likely to seek
favourable access for their citizens as a quid pro
quo for improved trading terms”.
including the flagship “Citizens’ Pratley in The Guardian. Brexit
Income” and the rolling back of may be “damaging” for the EU.
pension reforms. The Italian France’s “gilets jaunes” have
coalition government has also given the establishment a
cut its economic growth fright. It’s hardly a good time to
forecast from 1.5% to 1%. escalate a dispute with Rome.
Essentially, however, the It is Italy’s populists who
truce amounts to a have made concessions, says
“postponement of hostilities” Jason Horowitz in The New
rather than “perennial peace”: York Times. In a note to clients,
“delaying the introduction of Barclays described the truce as
the most expensive policies a “U-turn” which showed that
does little to address the that it realised the “potential
structural faults in the Italian perils” involved with “holding
economy that caused the unreasonable fiscal policies and
commission to block the budget an anti-EU stance”.
in the first place”. Italy’s debt, Regardless of who blinked
which exceeds 130% of GDP first, investors “breathed a sigh
and is the second highest in the of relief”. Markets “reacted
Eurozone, is still an issue. warmly”, the Milan-based stock
This is “old-fashioned market “rallied” and
politics at work, “ says Nils “borrowing costs fell”.
moneyweek.com
 Briefing 11

Politicians gunning for central banks

President Donald Trump’s criticism of US Federal Reserve policy is the latest assault on the
independence of central banks. Will the practice survive? Simon Wilson reports
What’s happened?
The US Federal Reserve raised its key
interest rate last week for the ninth time
since late 2015 despite President Trump
publicly urging it not to. Before the
decision Trump tweeted: “I hope the
people over at the Fed will read today’s
Wall Street Journal editorial – counselling
a pause in rate rises – before they make yet
another mistake. Also, don’t let the market
become any more illiquid than it already
is. Stop with the 50b’s (meaning: end the
$50bn-a-month unwinding of quantitative
easing). Good luck.” This episode was
the latest chapter in an extraordinary and
unprecedented public battle between the
US president and his pick as Fed chairman,
Jerome Powell. Trump has called Powell’s
decisions “crazy” and “loco” and made
clear that he is “not even a little bit happy”

©iStockphotos
with his appointment.
The Bank of England has taken to dabbling in politics
Are presidents supposed to do that?
Trump makes his own rules, obviously. political business cycle in which it’s harder inflation and the boom-and-bust cycle
But in venting his displeasure publicly he to control inflation and destabilising are no longer seen as the major challenge
is certainly breaking with longstanding booms/busts are more likely. These facing big economies. Rather, stagnation
practice. The Fed is independent. It is not election cycles were common in post-war and a lack of liquidity have been key
supposed to yield to political pressure, but Britain. Bank of England independence themes in recent years. It’s also because
to take its decision on the facts as it sees was advocated by 1980s chancellor the financial crisis meant central banks
them. It’s supposed to be a similar story Nigel Lawson and then taken up by had to follow much bolder and more
elsewhere too. But now “there’s concern New Labour. The idea is that a credibly politicised strategies – in particular
among the central banking community independent central bank will be more quantitative easing (printing money). The
that the independence of central banks willing to keep inflation low, and more influence and power of central bankers
could be under threat”, said South African willing to take politically unpopular has grown since the financial crisis – and
Reserve Bank governor Lesetja Kganyago decisions – such as raising rates – when that puts them in the eye of the political
earlier this month. necessary. storm and more vulnerable to criticism.
In India, the chief of the notionally The European Central Bank, for example,
independent central bank quit after Credibility is key? has been accused of sticking too rigidly to
coming under huge pressure from the Central banks work to policy parameters low inflation targets when the eurozone’s
Nahendra Modi government to loosen and targets set by politicians. But if the bigger problems were slow growth and
policy and channel reserves into public market has confidence in a genuinely high unemployment.
spending in advance of next year’s election. independent central bank, this in itself
In Turkey, President Erdogan has seized helps reduce inflationary expectations – a Is independence sustainable?
de facto control of the (again supposedly factor which in turn makes inflation easier Central bank independence is not an
independent) central bank. In both to keep low. So in the current Trump/ end in itself. It is a means to the end of
Argentina and Brazil Powell situation, for delivering superior financial stability and
the central bank
“Central bank-induced example, Trump’s economic performance. The truth is that
bosses recently quit election cycles were common sniping really does central bank independence may only be
for political reasons. matter in terms of possible when there is broad consensus on
And closer to home
in post-war Britain” economics. That’s the goals of monetary policy and where
at the Bank of England, Mark Carney’s because if the market came to doubt an independent central bank is capable of
role has been increasingly politicised. the Fed’s independence – ie if it came to meeting those goals. Both of those criteria
Brexiteers have criticised him for being too believe the central bank could be bullied are currently looking shaky.
gloomy, while his predecessor, Mervyn or coerced into keeping rates down – then The main Western central banks stand
King, has also weighed in on Brexit. inflation expectations would rise. And, accused (in 2005-10) of fuelling major
equally, if investors believed that Trump credit inflation followed by a needlessly
What’s the rationale for independence? was prepared to sack a Fed chairman that harsh deflation that led to prolonged
The thinking is that politicians can’t be he disagreed with, they would demand a recession, and then fuelling dangerous
trusted to run monetary policy because higher interest rate to compensate for the asset bubbles with years of ultra-loose
they are too influenced by short-term increased risk of holding US government policy. So when it comes to political
political considerations – such as Trump’s debt. interference, the message is – expect more
misconceived fixation with stock prices of it. “Reforming economic policy to fit a
(which benefit from easy money) as a But politicians are in charge? low-rate world requires discussion about
measure of his own political success. Yes. And that balancing act – of being the practice of monetary policy,” says
In the years running up to an election, independent within the confines of The Economist. “That discussion will
governments are tempted to cut interest political control – has got harder since necessarily be political. It is not crazy to
rates to stimulate the economy – creating a the financial crisis. In part, that’s because say so.”
moneyweek.com 28 December 2018 MoneyWeek
12 Investment strategy

What can Dow Theory tell us? Guru watch

Alan Greenspan,
Even if you’re sceptical about technical former
chairman of
analysis, it’s worth understanding what the Federal
Reserve
other people are getting from it The bull market
is over, according
John Stepek to Alan Greenspan.
Executive editor The former chairman of the
US central bank told CNN’s
Julia Chatterley that he
Charles Dow was the founder and first editor would be very surprised to
of The Wall Street Journal (WSJ). In 1896 he see the equity market
invented the Dow Jones Industrial Average “stabilise here, and then take
(DJIA), an average of the closing share prices of off”. And while he
acknowledged further gains
12 of the most important listed companies in might well be possible in the
the US, calculated daily. It provided WSJ readers short term, the eventual
with a way to track stockmarket activity, and reckoning would be all the
eventually evolved into today’s 30-strong Dow more painful. If stocks do go
Jones index. Dow was also extremely interested up, then “at the end of that
in markets, and his regular columns for the run, run for cover”.

©Alamy
WSJ were collected and formalised into “Dow Dow: a founding father of technical analysis While he was in his post,
Theory” after his death. It has become one of the Greenspan was often
most widely followed and influential technical when they rebound, they stall at a lower ceiling criticised for his tendency
analysis theories in the markets. than before. That suggests both have moved into
In recent weeks, Dow Theory has featured a bear-market trend, which in turn suggests the
heavily in the news. Why? Because markets in path of least resistance is now lower.
the US have been falling since October, and You might view technical analysis as a lot of
investors want to know if we’re rubbish. It often baffles investors
seeing the start of a full-on bear “Interpreting who would rather focus on the
market, or just another chance technical analysis is as fundamentals, and the wide
to “buy the dip”. Dow Theory
promises to help. Dow actually much art as science” range of interpretations mean it’s
as much art as science. However,
invented two indices – the aforementioned DJIA, even if you don’t want to start drawing lines all
and also the Dow Jones Railroad Average (now over charts, it’s worth being aware that plenty of
the Transportation Average, or DJTA). The idea other people do, and that Dow Theory has more
was that if there is healthy demand for the goods followers than most.
(known as the “Greenspan
being made in factories, then that should also be The other point for sceptics to remember is
put”) to cut interest rates
good for the companies taking those goods to that momentum (buying what’s going up and when stockmarkets
market. But if one index was rising but the other selling what’s going down) has a long history appeared to be running into
falling, for example, then that could be an early of working. You might struggle with the logic trouble. But despite his
warning sign of a turn in the economy. And if behind that, but whether you like it or not, it’s a actions as central banker (or
both fell together consistently, then it’s a sign widely respected “factor” (see below) in equity perhaps because of them),
that the outlook is turning grim. markets. So there is a great deal of value in Greenspan doesn’t think
What’s drawn attention now is that both the ascertaining whether the overall market trend is there’s any way to prevent
DJIA and the DJTA are making what’s known higher or lower. Whether you felt you needed a market volatility. “Unless
you can somehow radically
as “lower highs” and “lower lows” – ie, when signal from Dow Theory to tell you that after the
change human nature and
they fall, they fall below their previous low, and last few weeks is another matter, of course. how we respond, this is what
you’ll always get and have
momentum stocks, or a value
I wish I knew what a factor was, ETF that does the same for
been getting.”
The current jitters have
but I’m too embarrassed to ask stocks viewed as cheap on
certain measures.
been triggered by a
“pronounced rise in real
In the jargon, a factor is a To be clear, these factors will One problem with the race (after-inflation) long-term
characteristic that has been not always beat the market over to find new factors for smart interest rates”. But even if it
shown to contribute to market any given time period – but beta to exploit is the risk of wanted to, the Fed might
outperformance. Research into looking at historical data over data mining – if you look hard struggle to cut rates, given
factors was largely driven by the long run, they have enough at historical data, you that Greenspan also worries
academics trying to figure out generated superior returns in can find apparently that the US is now heading
why certain stocks tended to many different global markets. meaningful patterns that are for a period of stagflation –
generate higher returns than “Smart beta” is one trend in the in fact simply statistical where inflation rises even as
theories about efficient markets investment industry that tries to flukes. A 2017 paper by Kewei unemployment is picking up
would have predicted. exploit this using both the rapid Hou and Lu Zhang of Ohio and the economy is slowing.
For example, widely growth in computing power State University, and Chen The last time the US
accepted factors include size and a growing sense of Xue of the University of experienced such conditions
(the observation that small disillusionment with active fund Cincinnati, found that the was in the 1970s and early
companies tend to beat large managers. Smart-beta vast majority of 447 1980s, amid unrest in the oil
firms over time); value (cheap exchange-traded funds (ETFs) anomalies found by equity- market and turmoil in the
companies beat expensive promise to use computer market researchers were global monetary system.
©Getty Images; iStockphotos

ones); yield (high-yielding
stocks do better than low-
yielding ones); and momentum
(stocks that go up just keep on
going up).
algorithms to build and invest in
indices based on various
factors. So you might invest in
a momentum ETF that
continually rebalances into
precisely that. However, it’s
fair to say that the most-
established factors (such as
those listed above) are
widely accepted as true.
“How long it lasts or how big
it gets, it’s too soon to tell.
We’ll know it when we get on
top of it.”

MoneyWeek 28 December 2018 moneyweek.com

 City view 13

Uber IPO to be 2019’s crucial test case

The flotation of the world’s biggest ride-hailing app will be a pivotal moment for equity markets
Matthew Lynn
City columnist

We will see some major technology initial

public offerings (IPOs) in 2019. None
will be bigger than Uber. Over the last
year, investors have been buying into the
company at valuations of $70bn or more.
Everyone is going to want to make a profit
on that, which means the IPO will have go
even higher. The result? The deal is already
being pitched at $120bn.

Bigger than AstraZeneca...

It is an extraordinary sum of money for a
company that is only nine years old. If it
listed on the FTSE, it would come straight
in at number four, behind BP but ahead
of AstraZeneca.Then again, Uber is an
extraordinary business. It has two million
drivers, making 15 million journeys a day
in cities around the world.
It has become one of the very few
business with such a recognisable brand
that it has become a verb in itself – people
Uber around the place, in the same way
they Google for stuff (in the old economy,
only Hoover every really managed to pull
off that trick). In one of the world’s biggest
and most basic industries – transporting
people from place to place – it has become
a dominant player in a very short space of
time. That is a substantial achievement.
But is it worth $120bn? On the one
hand, it is clearly a fabulously successful
concept, with millions of users around the
world and huge potential for further
growth. A taxi market which in most cities
was over-regulated and over-protected,
and as a result way, way too expensive,
was ripe for disruption. Uber has slashed
the cost of transport and created a huge
new market, in much the same way the
budget airlines did when they stormed
Uber has disrupted the taxi market
into the airline market. It has used smart-
phone technology to create new products
like UberPool, where shared rides reduce
the cost even further, and make a taxi
competitive with public transport. As self-
driving cars develop, and Uber has been
pouring a fortune into developing that
technology too, its mastery of the networks
needed to connect people, vehicles and
journeys puts it in the perfect position to
dominate that industry as well. And that is
before you get into divisions such as Uber
Eats, which is competing on food delivery,
and Uber Freight, which is taking on the
massive trucking industry. It is not hard to
understand why this is a company that gets
people excited.
...but still a leap of faith
On the other hand, its management is
chaotic and it may never be able to make
a proper profit. Its co-founder Travis
Kalanick was embroiled in a series of
scandals and had to be replaced. Uber
has also burnt through more than $20bn
of its backers’ money, but while it has
managed to narrow its losses it still hasn’t
managed to make a profit. The taxi app
industry is ferociously competitive, with
very few barriers to entry, and Uber has
to constantly discount prices, or match
the one-off deals from its rivals, to stay
in the game. Its data and expertise might
be worth something – but perhaps not as
much as the bulls think.
So who will prevail, the bulls or the
bears? Uber is turning into a crucial test
of whether the huge new app economy
has any real substance, or whether it is
just unprofitable froth. If the latter view
prevails, then the stockmarket is in big
trouble. Technology has spearheaded the
bull run of the last few years. Uber’s IPO
will show us whether that market is still
in place. If it isn’t, it will take every equity
index down with it.

Who’s getting what Nice gesture of the week

l Crossrail’s former
CEO Andrew
Wolstenholme
was paid
£765,689,
including a
£160,000 bonus
and a £97,734
pay-off for “loss
of employment” (he
quit last March) months
before completion of the
line was officially delayed
by at least a year, says The
Times. This lavish package
made him by far the best-
paid transport official in
London. He has since been
appointed to the board of
Around 4,000 staff at Japanese-style
and northern from £600 a night. The bill restaurant chain Wagamama were
England. still amounted to less than given a Christmas bonus this year
two weeks of his £15m following the sale of the chain to the
l José annual salary. Restaurant Group for £559m. Head
Mourinho chefs and managers stand to receive
(pictured) lost l BT said last week that it £2,000 each, and waiters £1,000 a head,
more than his was “disappointed” at the provided they have worked at the chain
job when he was results of a recent vote on for at least 12 months.The bonuses,
sacked as its annual remuneration worth a combined £4m, were ordered
manager of report. Just over a third of by outgoing chief executive Jane
Manchester United last shareholders voted against Holbrook, and were reportedly intended
week. The Portuguese boss the proposals, with CEO as a sign of appreciation by Duke Street,
had reportedly run up a bill Gavin Patterson’s pay the private equity firm that bought
estimated at around drawing much of the ire. Wagamama for £215m in 2011, and has
£537,000 at The Lowry, a Patterson received a £1.3m since more than doubled its money with
five-star hotel in bonus on top of his £1m the sale. Wagamama, originally founded
Manchester, where salary in the year to the end by Alan Yau in 1992, has managed to
Mourinho had been living in of March, a period that saw cope with the turmoil in the high-street
a luxury suite for the past the shares slip by 30%. The eateries sector better than most in
©Getty Images

HS2, the high-speed rail two-and-a-half years. A telecoms giant said it would recent years. Operating profit came to
project between the capital riverside suite there starts have a rethink. £43m last year on sales of £306.7m.

moneyweek.com 28 December 2018 MoneyWeek

14 Funds

Hard times for alternative funds

Funds that promised diversification look worryingly vulnerable to rising market volatility
losses would drive up premiums
David Stevenson
Investment Columnist and dividend payouts.
But in the past week or so
that narrative has crumbled.
I’ve been a fan of the ideas First, the fund admitted
behind alternative funds for a to heavy losses from the
while. They invest in everything Californian wildfires. Then the
from renewables to aircraft bombshell – regulators were
leasing, offering investors a looking at how the managers
steady income plus the promise had been reserving losses. The
of diversification (ie, the recently issued C-shares have
shares should go in a different slid in value and investors must
direction to mainstream now be starting to ask whether
markets). Unfortunately, in the fund should be wound up.
recent months, we’ve started What are the common
to see signs of systemic trouble themes here? The first is that
throughout the sector. investors have focused on
The first hints came in late the wrong risks – tending to
2017 when many big peer-to- worry about liquidity rather
peer funds failed to hit their than more obvious risks.
dividend targets. Then came Infrastructure assets depend on

the sell-off of infrastructure
funds earlier this year amid
fears a possible future Labour
government might renege on
financing deals.
More recently we saw a
meltdown at alternative lender
Ranger Direct Lending – a
new board was put in place
to wind the fund down after
unexpected losses emerged at
one of its lending platforms.
This reliance on ‘trusted’
partners who then fail is an
issue seen in other alternative
sectors, as we’ll see. Ranger’s
travails also highlight another
challenge common to several
alternative lenders – after the
first few years, we start to
see a cross-section of loans
going bad, which encourages
investors to sell out, leaving
the funds to trade at chronic
discounts to book value.
Investing in catastrophe insurance can pay – but not this year
Social housing is another
troubled area. Several
investment trusts have raised
money to invest either in
supported living or affordable
housing. From a political
perspective I applaud this, but
these funds have always traded
on a misconception – that the
UK government stands behind
all the cash flows. Yes, the
government is on the hook
for the rental payments, but
in recent weeks a number of
smaller housing associations
(mainly focused on supported
living) have run into trouble.
Regulators have intervened
and the funds that have worked
with these associations have
had to take a hit to net asset
values. Notice the common
©Getty Images
theme – the risks of working
with “trusted” partners to
deliver investor outcomes.
Financial disaster
But the biggest meltdown has
been in a fund called Catco,
which promised an income
from underwriting reinsurance
contracts, based around
catastrophe insurance. The
fund is only on the hook if
losses from big disasters shoot
past, say $5bn. Otherwise,
existing insurers and reinsurers
have to pay. It apparently
offered true diversification –
there’s no reason for natural
disasters to correlate with
stockmarket cycles. So
institutional investors piled in,
hoping that recent hurricane
government policy and public
sector agencies. In Catco’s case,
the intensification of damage
claims in the developed world
from natural disasters has
been obvious for years. As for
lending, who can say they’re
surprised when lenders default?
The problem is that managers
don’t detail “worst-case
scenarios”, which frequently
turn out to be rather more
likely than investors realise.
The other problem with
these funds is that institutions
often already have the best
assets; retail-orientated funds
get the leftovers, which often
go sour quite quickly. Expect
fears over alternative funds to
intensify as we head into a more
volatile market environment
– which of course, is exactly
when these funds are supposed
to be providing diversification.

Activist watch Short positions... the investment trust of the year

Swiss automation company ABB will
sell a majority stake in its Power Grids
division to Japan’s Hitachi and return
the proceeds to shareholders, bowing
to pressure from Swedish activist
investor Cevian, says Reuters. The
acquisition of the $11bn unit, which
makes transformers and converters,
will make Hitachi one of the largest
players in the power-grid industry,
while allowing ABB to offload its least
profitable division and focus on
automation instead. However, the
decision to sell the unit represents “a
U-turn” for ABB’s chief executive,
who just two years ago ignored calls
to sell from shareholders such as
Cevian. Cash proceeds of as much as
$7.8bn from the deal will be returned
n Nick Train’s Lindsell Train investment trust
was the best-performing closed-ended fund in
2018, according to the Association of Investment
Companies, says Jayna Rayna in Investment
Week. The trust was up 44.5% between the start
of the year and the end of November. The top-
performing sector was biotech and healthcare,
which returned 16.9% for the 11-month period,
and was the only sector to have more than one
trust in the top ten. The £1.7bn Syncona trust
was up 31%, while the £410m BB Healthcare
trust, launched two years ago, returned 23%.
n The share prices of traditional fund managers
were hammered in 2018, says Chris Flood in the
Financial Times. In the toughest year for the
investment industry since the financial crisis,
listed European asset managers have fallen by
roughly 27% in dollar terms, while US firms are
n China’s clean-up of its
shadow-banking system
is fuelling a record
number of liquidations in
its $1.9trn mutual-fund
market, says Bloomberg.
More than 600 funds have been
closed this year, surpassing all
liquidations in the previous 12 years
combined. The Chinese government’s
crackdown on entrusted loans (a way for
cash-rich companies to lend to other
firms by using banks as middlemen, but
which has often involved banks using
the process to make the loans
themselves to risky borrowers), the
number two source of shadow banking,
as well as an ailing stockmarket, have
contributed to the record liquidations,
©iStockphotos

to shareholders via buybacks or

similar means, says ABB. down 24%, according to figures from data according to analysts from Morningstar
provider Refinitiv. and Z-Ben Advisors.

MoneyWeek 28 December 2018 moneyweek.com

16 Best of the financial columnists
Harvard Since 2012, Harvard University has been quietly “snapping up”
Californian vineyards, paying over the odds and purchasing them via
Money talks
fund scoops seemingly unrelated entities, including one called Brodiaea, says Russell
Gold. With the land, it has acquired rights to “vast sources of water” in
up water an area where climate change is making it an “ever-more valuable asset”.
According to a 2015 study, the Central Coast has experienced drought
conditions for 30% of the past two decades, compared with 14% of the
Russell Gold
prior century. Harvard’s bet has proved “prescient”. The $39bn fund, one
The Wall Street Journal
of America’s biggest endowments, “now values its vineyards at $305m,
up nearly threefold” since 2013. But the wager has angered locals who
worry Harvard will “use up groundwater and unduly influence water-use
regulations”. Brodiaea has been drilling extra-deep wells on its properties

©Getty Images
for several years. Harvard has also applied to build three reservoirs that
can each hold 16 million gallons. The fear is that it could eventually
seek to send water to cities in southern California – a fear that is hardly
groundless, given that Cadiz Inc. recently obtained permission to build a
“We’ve all seen the pay
pipeline from the Mojave Desert that will do exactly that. differences in jobs. I think
what’s been really
inspiring in your
Indian steel “Despite the long-standing global glut in steel, Indian producers are
relentlessly expanding capacity as if they live in a different world,”
generation is you’re taking
it on, you’ve all stood up
sector should subsidies
says Ritesh Kumar Singh. In a sense, they do. Decades of “protection,
and preferential treatment” have insulated the industry from
and gone, ‘This is not good
enough’.”

grow up international competition, allowing it to grow in a “bubble” of a “large

and expanding domestic market”. Now, Donald Trump’s economic
Actress Keira Knightley
(pictured), 33, on younger
women now starting their
nationalism has inspired steel producers to push the Narendra Modi careers on stage and in
Ritesh Kumar Singh
government to raise import barriers further. It must resist. India’s film, quoted in
Nikkei Asian Review
“looming” youth unemployment crisis demands a rethink. A “strategic” the Evening Standard
industry should be “defined on the basis of its economic multiplier effects
on employment, value-added production and exports”. Steel should “not “I’ve never made a buy at a
be considered ‘strategic’ simply because it is basic”. Chinese or South low that I didn’t... feel...
Korean imports would be cheaper, and by making steel more expensive scared to death making.”
than it should be, protection hurts “downstream industries that add much Hedge-fund tycoon Stan
Druckenmiller,
more value and could create many more jobs”. The government should
quoted on Bloomberg
focus on future-oriented sectors, such as artificial intelligence, high-tech
healthcare and aerospace. Steel, a “pampered infant”, should grow up. “If you only write
screenplays, it is
ultimately denigrating to
EU is playing I find it “extraordinary” that the EU, along with the German government,
is so cavalier about letting the UK crash out of the EU without a deal,
the soul. You may get
lucky and get rich, but you
a dangerous says Frank Schäffler. It’s not just their problem, after all. While they ship
€320bn of goods and services to the continent, we send almost €200bn
sure won’t get happy.”
William Goldman, Oscar-

game the other way. The EU seems determined to make an example of Britain
for having the temerity to leave, but the ramifications of a hard Brexit
winning screenwriter of
Butch Cassidy and All the
President’s Men, quoted in
would be far too high a price to pay for this strategy. If a political project The Guardian
Frank Schäffler
such as the unification of Europe can only be kept going with bullying
WirtschaftsWoche
and intimidation, there is nothing to be said for it. The EU would be “I have been at probably
much better advised to ditch the urge to achieve “ever closer union” every powerful table that
and concentrate on establishing a looser, more nimble arrangement: an you can think of. I have
à la carte Europe whereby countries can choose their level of political worked at non-profits, I
integration and reverse the decision if they want. It should be possible to have been at foundations,
I have worked in
quit the euro, for example, and not just the EU. All this can be predicated
corporations, served on
on making everyone sign up to the single market, but that’s as far as corporate boards, I have
any country should feel obliged to go. If the EU doesn’t learn to bend, it been at G-summits, I have
will break. sat in at the UN: they are
not that smart.”
Former US first lady
The cost of Today, only 15% of all payments in Sweden are made using cash, says
Natalie Ceeney. Around 4,000 Swedes have even inserted microchips into
Michelle Obama on some
men in the workplace

a cashless their hands to pay for goods and access office buildings. Yet the hospital
system’s recent decision to go cashless has caused widespread anxiety and
being mediocre yet
overconfident, quoted in

society is “of such great concern” that an all-party commission and the central
bank have intervened. The UK, which is behind Sweden, but not by much,
The Observer

“He said if he wanted to be

should take note – before we “sleepwalk into a cashless society” that risks sipping champagne with
Natalie Ceeney
excluding millions. The cash infrastructure is a physical one, with toffee-nosed, floppy-
The Daily Telegraph
largely fixed costs (printing, distribution, etc) of around £5bn a year. haired public schoolboys,
If fewer people use cash, the costs rise for those who use it: in Sweden, he’d be off running
the “real threat to cash” that has emerged is retailers’ unwillingness to Momentum.”
take it. In the UK, around eight million people rely on it. Cash makes Spectator editor Fraser
Nelson on why shadow
it easier for the poorer to budget. People with disabilities struggle with
chancellor John McDonnell
touch screens. Those with carers may not want to divulge PIN numbers. couldn’t accept the
That’s before considering the possibility of an IT failure or cyberattack. magazine’s politician of the
As we move towards a lower-cash economy, it is vital to ensure that no year award in person
one is left behind.
MoneyWeek 28 December 2018 moneyweek.com
 Best of the blogs 17

More than just Generosity with time, not just money, is an

essential part of the Christmas spirit

gifts and grub

Capx.co
It is that time of year again,
says Harry Phibbs. One
tradition we can always rely on
is for “one misery guts pundit
after another” to complain
that “Christmas has lost its
meaning” and become too
commercial. The implication
is that there used to exist a
shopping around to ensure that
they were “up to scratch”, with
“a bit of haggling about price to
avoid being overcharged”.
“Any sense of the spirit of
Christmas, religious or secular,
includes generosity.” Certainly,
that generosity is not only
financial, but also about the
time given over to see friends

time when Christmas was
not commercial.
Yet the festival has long been
about “eating and drinking,
giving and receiving, buying
and selling”. The tradition
of gift giving over the festive
period has deeper roots
than some might imagine.
Matthew tells us the three
wise men presented the infant
Christ with “gifts; gold, and
frankincense and myrrh”.
We are not told where they
got the goods, but the most
plausible explanation is that
they had been purchased.
Perhaps the wise men did some
©Alamy
and relatives and to indulge
the whimsy of children. Still,
the Charities Aid Foundation
reports more money is donated
to good causes in December
than during any other month
of the year. And to quote one
of Margaret Thatcher’s less
popular statements, “No-one
would remember the Good
Samaritan if he’d only had
good intentions; he had money
as well.” To be generous you
first need to have something
to give.
The critics do have a
point, however, when they
say that today we binge too
much before Christmas Day
itself rather than gradually
building up our anticipation
of a feast through advent.
Modern society is so rich that
the bounty of Christmas is
spread out through the entire
year. In my pre-video recorder
childhood, “an important part
of Christmas Day for me was
that a James Bond film was on
the television”. Yet my children
have “the full boxed set of
Bond films” to watch whenever
they please. The culinary treats
of the season also seem less
enticing. Today supermarket
shelves groan all year round
with “exotic” foods that blow
turkey and bread sauce out of
the water.
If you think that, thanks
to capitalism, your material
needs have already been
fulfilled this year, then may
I suggest a “festive visit to
church”. Whether it be religious
or cultural – for the music,
tradition and architecture – it
will give you something to look
forward to “aside from gifts
and grub”.

US students ditch humanities

Nationalreview.com
Another smoggy
winter for Poland
Economist.com
American media and academics have been wringing their hands following news the University of World leaders gathered in
Wisconsin-Stevens Point plans to drop “liberal arts” majors in geography, geology, French, German Katowice this month for
and, worst of all, history, writes Victor Davis Hanson. The culprits are said to be the “insidious” the United Nation’s COP24
effects of STEM (science, technology, engineering and mathematics) vocationalism and “crass climate conference. The city
Republican” legislators who have cut state-education budgets. Yet it is the students who have been of 300,000 people was a
voting with their feet. These courses have suffered a catastrophic decline in enrolments. surprising choice. It is the heart
The fault does not lie with the subject matter. The non-fiction best-seller lists show there is still of the country’s coal-mining
plenty of public appetite for “histories of war and peace” and biographies of famous leaders. Yet industry and among the most
a student signing up for a history class – financed by money borrowed at high interest rates – will polluted settlements in Europe.
discover modern universities reduce the “complex tragedy” of the past to a “periodic harangue on The problem is not limited to
the oppression and victimisation of particular marginalised groups”. To “naturally resistant young Katowice, either. Readings
spirits”, the “calcified sixties-era radicalism” of the modern academy comes across as “preachy” and of dust particles show Poland
“proselytising”. So they drift away. has 36 of Europe’s 50 most-
polluted towns.
The main culprit is coal,
Getting ahead
Yet about one in five some workers “gamed the
which generates about 80% of
teams examined present a system” – they would appear
the country’s electricity, and
conundrum. Outwardly very engaged in meetings with
with no effort these workplaces “appear to
have lots of commitment and
senior management yet fail
to do much real work. Such
the key problem is “coal burnt
in people’s homes”.
Around half of households
BBC.co.uk support for company goals”, “pseudo-engaged” behaviour
rely on fuels such as hard coal
When productivity researchers but results tell a different damages trust and cohesion in
or firewood for heating. The
at Hult International Business story. The researchers found teams, as colleagues conclude
more financially hard-pressed
School launched a study into that there is little point in
Busy? Or doing nothing? burn waste coal or slurry. The
productivity at UK workplaces putting in the spadework to
government is finally rolling
they found all was not as it make somebody else look good.
out a “Stop Smog” plan,
seemed. The study, which Worse, the researchers found
with €23bn in subsidies for
covered sectors such as health, those adept in the art of looking
household insulation and bans
government, transport and “busy and successful” without
on the poorest-quality coal due
non-profit organisations, “actually doing anything
to take effect on 2020. Yet for
found most workers are either useful” were “more likely to
©iStockphotos

the time being, “Poles are in for

motivated and productive, or get promotions, better pay and
another smoggy winter”.
disgruntled and disengaged. bonuses”.
moneyweek.com 28 December 2018 MoneyWeek
18 Personal finance

Tax deadline Do I need to file?

How do you know if you

almost here
have to file a return in the
first place? There is a tool
on the HM Revenue &
Customs website that
can help (www.gov.uk/
It’s not going to do itself, and you’ve check-if-you-need-tax-
return), but in general,
only got a month left – so get to work you’ll need to file if any
on your tax return now of these apply: you are
self-employed; you
received more than
£2,500 in untaxed
Ruth Jackson income; your income is
Money columnist more than £50,000 (even
as an employee) and you
claim child benefit; your

I t’s probably the last thing you want to think

about, but the deadline to file your self-
assessment tax return and pay your bill is
income from savings or
investments was more
than £10,000 before tax;
looming. Both have to be done by 31 January, you need to pay capital
and you now have to do it online – you’ve already gains tax on profits you
missed the paper deadline of 31 October. So crack made on selling a house
or other assets; or your
on and don’t let it hang over you any longer.
taxable income was

©iStockphotos
The 2017/18 tax return above £100,000.
Get your paperwork in order deadline is looming If you do need to file a
It makes sense to gather all the paperwork you’ll return, and you haven’t
need before you start. This includes employment- 2017/18 tax year. If, on the other hand, you have done one in the past,
related documents such as any P60s, P45s, or a lodger, you can still claim the £7,500 Rent a then you’ll need to be
P11Ds, plus your PAYE code and tax certificates Room allowance, which is the amount you can registered on the HMRC
for your savings and investments. Then you need earn tax-free from renting out a furnished room in website (the paper
to get your paperwork together and figure out your house. deadline has passed),
which can take up to 20
which expenses you can claim. For example, if Finally, a couple of benefits-related issues to be
working days. In other
you work from home you can claim expenses aware of. If you’re a pensioner, the state pension is words, you’d better
for the cost of running your home when you are paid gross. So, if you earn more than the personal register right away.
working from it. This can allowance (£11,500 in the What if you don’t pay
be done as a flat rate if you “You’ll still need to give your 2017/18 tax year), you need your taxes on time? You’ll
work more than 25 hours accountant your paperwork, to declare the state pension. be fined £100 if you miss
a month from home – the For parents, if you receive the initial deadline of
rate varies from £10 to so stay on top of the filing” child benefit, but any member 31 January. Then, you’ll
£26 a month depending on how many hours you of your household earns £50,000 or more, then pay £10 a day if you are
more than three months
work. Also, if you use your car for work, and your you need to repay some or all of it.
late filing, with extra
employer pays less than the HMRC-approved If it all looks a bit too complicated (particularly fines added after six and
mileage rate (45p for the first 10,000 miles; 25p a once you start getting into more complex issues then 12 months. On top
mile above this) you can claim the difference. such as property management), then it can pay to of that, you’ll pay another
Landlords can claim expenses such as agency get expert help. A decent accountant should be 5% of the total owed if
fees, ground rent, and the costs of replacements able to make sure you are claiming for everything you are more than 30
for furniture and appliances. But you can no you should be – just remember that you’ll still days late in paying. Your
longer claim for home improvement and you can need to provide them with the paperwork, so try total penalty can be up to
only claim 75% of your mortgage interest in the to stay on top of your filing. 100% of the bill.

Pocket money... what to do in the case of drone disruption

n If you were affected by the
drone-inspired flight disruption
which closed down Gatwick
Airport for more than 24 hours
in the run-up to Christmas, what
are your rights? The incident
was classed by the Civil
Aviation Authority as an
“extraordinary circumstance” –
an event outside the control of
the airline – which means no
specific compensation
associated with the disruption
is payable (although you should
of course still have been
refunded your flight costs if you
chose not to go, or been put on
an alternative flight, potentially
with a different airline, at no
extra cost).
If you missed hotel bookings,
car hire, or had already paid for
and booked activities for The reason this
example, then you would have ends up costing
to talk directly to the providers consumers in
in question. If you have no luck general is that “Ovo,
there, then talk to your travel ScottishPower and
insurer, says the Association of other suppliers who
British Insurers, “as these may have taken on
be covered under the terms of customers of failed
your travel insurance.” Callum firms can recoup
Mason of MoneySavingExpert some costs through
also suggests that if such a mechanism known
bookings were made by credit as ‘Supplier of Last
card it might be possible to get Resort,’ ultimately
your money back via a Section paid for by all
75 claim – “though there’s no consumers via their
guarantee that this will work for bills.” Co-operative
everyone”, he notes. power companies have Energy, for example
collapsed this year amid rising successfully claimed £14m
n British households are facing wholesale prices, which has through the scheme after taking
an £80m bill “left over from forced energy regulator Ofgem on 160,000 GM Energy
failed energy firms,” says Adam to step in and switch customers customers after the latter went
Vaughan in The Guardian. Eight to new suppliers. bust in 2016.

MoneyWeek 28 December 2018 moneyweek.com

 Pensions 19

A time for consolidation Don’t miss out on

pension tax relief
To get a grip on your pension finances, it helps to have it all in one place n Around ten million people
must complete a 2017-2018
David Prosser self-assessment tax return
Business columnist by the end of next month
(see page 18). If you’re one of
them, ensure you get all the

F or many people, getting to

grips with their finances is
a key new year’s resolution and
tax relief you’re owed on
your pension contributions.
Everyone automatically
receives basic-rate income
pension planning is often a big
tax relief, worth 20%, on
part of that. In particular, now such contributions. But
is a good time to take a look at higher- and additional-rate
consolidating pension savings taxpayers are entitled to an
you may have in several different extra 20% and 25%
places into a single plan. respectively. If you’re a
There are lots of advantages member of a work-based
to doing this. The average scheme, your employer will
worker now builds up 11 usually claim this on your
behalf, but if you’re in an
pension pots with different
individual arrangement such

employers and pension
providers during their working
life, according to government
data. So it’s easy to lose track
of your cash over time. In fact,
research last year from insurer
Aegon suggested one in five
people have lost track of at least
some of their pension savings.
Having all your money in one
place should reduce the risk of
overlooking any.
Keeping it all in one place
Consolidation should also
make it easier to manage
your savings. You can see
exactly what your total
pension savings are worth,
monitor the performance
of your investments (and
keep an eye on any charges –
which may well be excessive,
particularly on older pension
plans), and assess whether
you’re on track to hit your
retirement goals.
Consolidating can be time-consuming, but it’s worth it
So how do you go about
doing it? One option is to work
out which is the best of your
current pensions, then move
all your money into that plan.
Pay close attention to the fees,
of course, but also make sure
you understand the investment
options and facilities the
pension offers for the future.
For example, if you plan on
using income drawdown in
retirement, what would this
involve? And does the scheme
give access to the sorts of
investment you want to use?
Alternatively, you could
start an entirely new pension
plan elsewhere and transfer
everything into this scheme.
This allows you to select the
perfect pension for your needs.
But before you go ahead,
consider potential downsides of
©iStockphotos
as a personal pension, you’ll
have to claim via your tax
return. This may also be the
transferring. If you’re currently case if your work scheme is
paying into an employer’s set up as a group personal
scheme, you will be receiving pension – if in doubt, check.
contributions from them, The annual allowance on
topping up your savings; pension contributions for
exiting such a plan is likely to
be a bad idea, as you’ll miss out
on future top-ups. Similarly,
if you have pension benefits
in a final salary or defined
©iStockphotos
benefit scheme, it is almost
never a good idea to transfer
out, because these plans offer
guaranteed levels of retirement most people is the lower of
income that will be tough to their taxable salary or
match elsewhere. £40,000. But if you’re in
Also check whether you danger of exceeding this –
have to pay exit charges, or and so facing tax charges –
whether there are any loyalty you may be able to use the
carry-forward rules. These
bonuses you’ll miss out on by allow you to bring forward
going elsewhere. If so, you may unused pension allowance
need to estimate your chances from each of the past three
of recouping these costs in the years to top up this year’s.
years following a transfer.

Tax tip of the week Should we bin the £10 pension bonus?
France will introduce its own tax on big Is it time to dump As a snap poll of worth around £134 today – a
technology firms from 1 January, after the Christmas Daily Mail readers far more meaningful sum.
EU-wide efforts stalled, says BBC News. bonus for found last week, When it was first
The French finance minister expects the pensioners? many pensioners distributed, the money
tax to bring in €500m over the course of For almost now believe the was enough to pay for a
next year. France and Germany had 50 years the government Christmas turkey, with cash
been pushing the European government would be better left over to pay for presents
Commission to agree to measures by has topped up off spending the and other festive shopping.
the end of 2018, but the digital tax is the state money more Indeed, the bonus was
opposed by countries such as the Czech pensions of most wisely. The total worth more than the weekly
Republic, Sweden and Ireland. The EC pensioners with an cost, at around state pension of £6.75
has published proposals for a 3% tax on extra payment; this year’s £130m, could be targeted payable at the time. Today,
the revenues of internet groups with bonus was paid to around at the most vulnerable by contrast, it’s a relatively
global revenues of more than €750m 13 million pensioners at the pensioners, or redirected to meagre offering in the
and taxable EU revenue above €50m, start of the month. a totally different priority. context of a state pension
but critics fear an EU tax could breach There’s just one catch: The £10 per person, by worth just over £164 a week.
international rules on equal treatment the cash on offer has not contrast, buys very little. However, the Department
for companies across the world. been increased since it was Had the bonus been for Work and Pensions says
UK chancellor Philip Hammond plans first introduced – the bonus increased in line with price it remains committed to the
to introduce a digital-services tax in the is worth only £10, and many inflation since 1972, when it bonus – understandable
©Getty Images

UK from April 2020, but this needs to go pensioners don’t even was introduced by then- given the “Christmas
through a consultation first. notice the extra money prime minister Edward cancelled” headlines it
landing in their accounts. Heath (pictured), it would be would probably provoke.
moneyweek.com 28 December 2018 MoneyWeek
20 Analysis

The economic
consequences
of veganism
We hope you enjoyed your Christmas turkey. But should
you leave the poor beasts alone next year and serve tofu on
the big day instead? Stuart Watkins reports
Simon Amstell is that apparently rare thing – a vegan
with a sense of humour. He is the writer and director
of the 2017 film Carnage, a mockumentary set in the
Britain of 2067, when the eating of meat and all other
animal products has been banned. Young people
take the new regime for granted and struggle even
to understand the moral order that has passed; older
generations examine their consciences and suffer from
feelings of guilt as they wonder what kind of monsters
they must have been to eat meat, eggs and cheese as if
there were nothing wrong in doing so. Amstell’s future
Britain is a world in which even the word “veganism”
has disappeared, since it simply signifies the cultural
norm; “carnism” has instead come in to use to describe
the ancestral diet, as well as the extremist ideology that
justified it. As Amstell has it, our present-day world is
one where it’s normal to suck on the teats of a cow who
has had her “babies” ripped away from her and either
killed or locked up in pens in the dark. If you prefer to
drink beetroot juice instead, you’re the maniac!
We remain some way from Amstell’s imagined
Around 7% of us are now vegan
future, but veganism is on the rise. According to a
report from Waitrose, one in eight Britons is now in meat cost 7.2kg of carbon dioxide emissions per
vegetarian or vegan. A further 21% claim to be day, compared with 3.8kg for vegetarians and 2.9kg
“flexitarian” – ie, to follow a largely but not strictly for vegans. A 2018 paper by Joseph Poore of Oxford
vegetarian diet. That means around a third of Britons University found that going vegan would cut carbon
are reducing the amount of meat they eat, or are cutting emissions from food production in half. It would also
it out altogether. The number of vegans in the UK has free up land for other uses. Nearly 80% of the world’s
grown fourfold in the past four years, from 150,000 farmland is dedicated to rearing animals; a plant-based
to 600,000, according to the Vegan Society. A survey diet would cut the use of land for agriculture by 76%.
for CompareTheMarket.com found similar figures but The land currently used by grazing livestock could
put the number of vegans as high as 7%. According to be used for “rewilding”, says Monbiot, allowing the
the Waitrose report, about 60% of vegans and 40% ecosystems destroyed by livestock farming to recover,
of vegetarians had adopted the diet over the past five absorbing carbon dioxide from the atmosphere,
years, with 55% citing animal welfare, 45% health, and protecting watersheds and halting species destruction.
38% environmental issues as the reason for their choice. Some people retort that soya production is equally
destructive of forest, savannah and marshland. But
The case for cutting out meat as Monbiot says, if you want to eat less soya, then
But are the turnip-munchers right to be cutting out the you should eat soya: 93% of the soya we consume is
meat and cheese? George Monbiot, the environmental fed to the animals we then eat. Taken together, the
campaigner, certainly thinks so. The environmental results seem clear-cut. As Chloe Cornish notes in the
case for cutting out meat seems compelling enough on Financial Times, Poore’s paper alone marshalled data
its own. “Whether human beings survive this century from 570 studies covering 38,700 farms. It looked at
and the next, whether other life forms can live alongside 40 common foods and assessed how much land and
us: more than anything, this depends on the way we water they use, what they contribute to greenhouse-
eat,” he wrote for The Guardian earlier this year. gas emissions and to what extent they cause problems
“We can cut our consumption of everything else almost “Whether such as groundwater and freshwater becoming more
to zero and still we will drive living systems to collapse acidic. It couldn’t find any animal products that were
unless we change our diet.” According to Monbiot, “all
human beings more environmentally friendly than their plant-based
the evidence now points in one direction: the crucial survive alternatives. As a result of his findings, “Poore ate his
shift is from an animal- to a plant-based diet”. last Pret a Manger cheese-and-tomato croissant and
For a start, there are the greenhouse gases released
this century went vegan”.
as a result of producing food. The evidence seems depends And it’s not just the planet that would benefit. Our
clear that switching to a plant-based diet would health and wealth would too. A study from the Oxford
lower emissions. A UK study published in the journal
on the way Martin Programme on the Future of Food, published
Climatic Change in 2014 found that eating a diet high we eat” in 2016, modelled what would happen to our health
MoneyWeek 28 December 2018 moneyweek.com
 Analysis
“By 2050,
8.1 million
deaths could
be avoided
if we all
went vegan”
©Alamy
and the global economy if we all switched to either
vegetarian or vegan diets. By 2050, 5.1 million deaths
could be avoided if we kept our diets within current
recommended dietary guidelines. If we went vegetarian,
the figure would be 7.3 million lives saved. If we went
vegan, it would be 8.1 million. The economic benefits
of dietary change could be as much as $700bn-$1trn
per year in terms of savings on healthcare costs and lost
working days due to ill health.
The author of this research, Dr Marco Springmann,
believes his figures are conservative and probably
an underestimate. He is an advocate of a tax on
animal products so that their prices reflect the cost of
externalities. If the cost of climate damages associated
with the greenhouse-gas emissions of foods were
integrated into the price of food, beef would be 40%
more expensive, he reckons, and milk and other meats
would cost 20% more. The greenhouse-gas emissions
from food production, coupled with population growth
and the aspiration in developing countries to consume
similar meat-heavy diets as in the UK or the US, could
make it very hard to limit global warming to below the
two degrees specified in the Paris climate agreement, he
told Oxford Today. Things cannot stay as they are, he
says. We need a paradigm shift so that “eating meat…
becomes as frowned upon as smoking”.
Some massively misleading claims
Indeed, eating meat is fast becoming as repellent as
smoking to many campaigners, says BjØrn Lomborg on
Project Syndicate. But the massive figures often quoted
to convince us to go vegan are “massively misleading”.
Importantly, the often-quoted 50% reduction in carbon
emissions is the reduction in an individual’s personal
moneyweek.com
21
emissions that are accounted for by food. But that only
accounts for a fifth of our total personal emissions.
Additionally, those savings are from a lifestyle that
would not only eschew meat and dairy and eggs, but
also honey, seafood, fur, leather, wool, gelatin and
much else. “This is not going to be a mainstream
dietary and lifestyle regime anytime soon.” If we turn
to a systematic survey of peer-reviewed studies in the
literature, rather than cherry-picking the best-sounding
numbers, we find that a non-meat diet will reduce an
individual’s emissions by 540kg of carbon dioxide.
For the average person in the industrialised world, that
means cutting emissions by just 4.3%. But even this still
overstates the effect because it ignores an “age-old...
economic phenomenon known as the rebound effect”.
Vegetarian diets are slightly cheaper, and the saved
money is likely to be spent on other goods and services
that cause additional greenhouse-gas emissions. In the
US, vegetarians save about 7% and in the UK about
15% of their food budgets. A Swedish study showed a
vegetarian diet is 10% cheaper, freeing up about 2%
of an individual’s total budget. That extra spending
will cause more carbon-dioxide emissions and cancel
out half the saved emissions from going vegetarian,
the study concludes. Instead of going completely
vegetarian for the rest of your life, you could reduce
greenhouse-gas emissions by the exact same amount
by spending $6 a year using the European emissions
trading system while eating anything you want.
There are many good reasons for eating less meat, says
Lomborg, who is a vegetarian himself. But making a
huge difference to the climate isn’t one of them.
Going mainstream
Nevertheless, the climate is just one of many reasons
people cite for going vegan, as Dan Hancox says in The
Guardian. And if the forecasters and market analysts
are anything to go by, veganism is “going mainstream”.
In 2016, a group called Fairr (Farm Animal Investment
Risk and Return) co-ordinated a group of 40 large
institutional investment funds worth £900bn publicly
to urge major food producers and retailers such as
Kraft Heinz, Nestlé, Unilever, Tesco and Walmart to
develop plant-based alternatives. Supermarket shelves
now groan with vegan products; hip vegan eateries
are popping up all over London and beyond. “There’s
growing... support” from investors, says Rosie Wardle,
who worked for Fairr. “Across the board now, market
research firms, food analysts, industry commentators,
they’re all talking about alternative proteins and
flexitarian diets.”
Investors who want to take a punt on the trend might
consider a forthcoming exchange-traded fund, the US
Vegan Climate ETF (there is no ticker yet). It will track
an index based on the Solactive US Large Cap index.
This is a proxy for the S&P 500, but it excludes firms
that engage in animal-unfriendly practices or that
belch out greenhouse gases. For a hefty fee of 0.6%,
you will avoid funding the slaughter of 13 animals
a year for every $1,000 invested, according to the
company behind the launch, Beyond Advisors. The
top-ten holdings of the underlying index include such
names as Apple, Microsoft, Alphabet, Facebook and
JP Morgan – so hardly pure plays on dietary changes.
Another option is LA-based meatless burger maker
Beyond Meat, which has filed for a $100m initial public
offering. It will trade on the Nasdaq with the ticker
BYND. Its products aim to replicate the taste and look
of meat. If plant-based proteins can replicate the success
plant-based milks have had in the dairy market, then
Beyond Meat is looking at a possible $140bn market,
according to the FT’s Lex column. Get in at the start,
and you could soon be toasting your good fortune with
a celebratory glass of beetroot juice.
28 December 2018 MoneyWeek
22 Analysis

What’s wrong with

capitalism? Too
little competition
Powerful corporations have grown too used to dictating terms
to consumers, workers and suppliers. Merryn Somerset Webb
talks to Jonathan Tepper about how to fix it
There is something wrong with the way capitalism is
working in the West at the moment. On that I think
pretty much everyone is agreed. But what is wrong?
Jonathan Tepper, author of The Myth of Capitalism:
Monopolies and the Death of Competition might have
the answer. It came, he says, from trying to figure out
something all economists have been trying to figure
out over the last few years – why wages just won’t
rise. Tepper’s day job is as an economist at Variant
Perspective, the global macroeconomic trading and
research group he founded. There, “year after year,”
he monitored all the leading indicators that usually tell
us where wages are headed. They told him that the US
labour market was tightening, and that wages should
be rising. After all, as the supply of labour falls, so the
price of that labour should rise as companies started to
compete and bid up wages. But that never happened,
something that had the puzzling consequence of
preventing corporate profits from reverting to the mean
(the wage bill is the average company’s biggest bill).
That mattered hugely to Tepper in his day job.
Four main US airlines, in effect, operate local monopolies
Company profit margins have always reverted to the
mean – ie returned to their long-term average – in capitalism not being “too many capitalists, but too
the past (market guru Jeremy Grantham of US asset few capitalists.”
manager GMO calls them “the most mean-reverting How, I ask, did we get here? In the post-war period,
series in finance”). But if they aren’t going to any more says Tepper, anti-trust laws in the US and western
(and profits will be elevated forever) two questions Europe were strict and “broadly enforced.” So firms
arise. First, is there a new argument for paying higher were in the main not allowed to buy their direct
earnings multiples for stocks than in the past? And competitors (they bought firms that did other things
second, can the death of mean reversion explain instead – this was the age of the diverse conglomerate).
what’s wrong with capitalism? Then in 1982 work by Robert Bork and Milton
Friedman’s disciples at the University of Chicago led
Too few companies with too much power to a change in the rules, the idea being that if you
It was in looking into the first question that Tepper allowed companies to merge, they would become
found the answer to the second. “I realised that… more efficient and “magically pass on those savings
particularly in the US… which is probably the most to the consumer.” And so it began – and four decades
advanced in this trend, you’re seeing more and more and four mega-merger waves later, the make-up of the
industrial concentration.” There are fewer players corporate world has been transformed.
in each industry than there used to be. That gives
companies pricing power over the consumer (which The illusion of choice
investors such as Warren Buffett love to see). But Take the US beer industry. Go into a liquor store and
“less discussed and understood is that they often have you will see hundreds of brands of beer. It looks like
power over the worker”: they don’t have to bid against you have endless choice. But in truth, two players
rivals for labour. They also gain huge power over the control 90% of the market between them. Tepper’s
suppliers. The result is obvious: a small number of book is full of similar examples (go and buy it!).
huge companies capturing very high profit margins.
“Can the Cereals are another obvious place of concentration.
The key, says Tepper, is that “capitalism has two death Three firms control the entire market – to the extent
elements”. The first, absolutely vital to it, is private that they decide between themselves what shelf
property. This is no longer really disputed. China –
of mean space they take at the supermarkets (this is called
which still declares itself communist – now offers most reversion “category management” and “not prosecuted as
people the ability to own property. Even in North being in any way collusive”). Cable companies are
Korea, the leaders have their own private property.
explain another example; airlines another. There are four
“So that battle’s won.” The second part, however, is what’s main airlines but even that doesn’t tell you quite how
competition – and that battle, once won, is now being much control they have. Look more closely and you
lost to the extent that we are back to the problem
wrong with see that they operate local monopolies: for example,
G. K. Chesterton once identified: the problem of capitalism?” 80% of the flights in and out of Atlanta are Delta
MoneyWeek 28 December 2018 moneyweek.com
 Analysis
“It’s easier
to raise an
armed militia
in the US
than to start a
credit rating
agency ”
©Getty Images
flights (something that explains how they get away
with treating their passengers as badly as they do).
And “if you live in Charlotte, good luck getting out of
Charlotte not flying American.”
It isn’t, however, just mergers that have created
monopolies. It is also the rise of regulation. Take
credit ratings agency Moody’s (a huge favourite with
Buffett, thanks to its monopolistic characteristics).
It is, says Tepper, a classic example “that only exists
due to regulation. You and I spend our lives looking
at markets. There’s no reason why you and I today
could not start a rating agency. But we can’t do that…
because of the NRSRO (Nationally Recognised
Statistical Rating Organisation) credential you need.”
Moody’s has one. They are hard to get – so much so
that “it’s easier to raise an armed militia in the US
than it is to start a rating agency.” These are the kind
of regulations that serve to create “crony capitalism”
and which are doing so in industry after industry (in
the last 22 years, federal agencies have published more
than 88,000 final rules) with the depressing result we
see all around us: “less competition, less innovation,
less capitalism.”
Look to the European Union (EU) and you can see
a similar dynamic. Take asset management and the
sharp rises in compliance costs there, as a result of new
regulation (those in the business will get an instant
non-holiday feeling from acronyms such as AIFMD,
MiFID and MiFIR). The result is a few big asset
managers and banks who are the only ones who have
the wherewithal to have the required internal systems
to deal with “compliance, legal, tax and all that” – and
very few start ups. Look at hedge funds, for example:
the top 100 have about 90% of the assets.
moneyweek.com
23
The way to think about the effect of regulation
on competition (and to understand why the more
oppressive-seeming it is, the more big companies
love it) is to think about it in terms an organisation’s
capacity to deal with it. A big bank that is no longer
growing has hordes of energy for compliance. A start-
up using all its energy to innovate does not. A huge
dose of new regulation can kill it fast – by distracting
it, but also by adding hugely to its costs before it has
the critical mass to absorb them. Note that the number
of start ups and newly-listed companies has been
falling for years – and not just in the US, in Germany
too: it’s like a dystopian movie, says Tepper, “where
we all get old and no-one has any children.”
We go back to what this means for inequality. In a
nutshell, I say, what’s happening here is that the merger
and regulation-driven concentration of industry is
holding back both wages and entrepreneurial activity,
and this is giving us higher levels of both income and
wealth inequality than we should have. That’s it, says
Tepper. Think of it as a type of “aggressive taxation”
in that it transfers money from the poor or middle
class to those who own shares in these companies.
Fixing capitalism
Back to Buffett (who I get the impression is not
Tepper’s favourite person): “it’s no surprise that almost
all of Buffett’s holdings have been monopolies and
duopolies and that’s made him, up until Jeff Bezos, the
richest man in America.” This takes us to the really
tricky bit. If Tepper is right (and it’s hard to think he
isn’t) and it is the rise of powerful oligopolies that are
in large part responsible for the rise of inequality (and
its political consequences), what do we do about it?
First, ensure markets are open for competition.
Second, break up the huge merged groups that
destroyed it in the first place. And third, recognise the
role of regulation, says Tepper. Obviously we need it
(“I’m not in favour of people being poisoned by the
water”) but perhaps it needs to be “principles-based
regulation rather than extreme rules-based.” Think
more the 35 pages that made up the very effective
Glass-Steagall Act, rather than the thousands that
make up new ones. Ask firms to observe principles and
the spirit of principles, rather than endless complicated
rules, and you’ll get more competition. Do it with
banks in particular and, given small banks tend to
lend to small businesses, “we will end up with a much
better and more equitable social outcome.”
This all really matters. We have been saying
at MoneyWeek for years that capitalism has to
reform itself before it is reformed. Tepper is saying
something very similar: “if capitalists and people
who love competition don’t reform markets, people
who don’t like capitalism are going to do it.” The
good news is that the response to his book has been
hugely enthusiastic (all events are packed) and, like
us, he feels that change is coming – politicians are
grasping the problem and would now “prefer to get
ahead of the crowd and pretend they’re leading the
parade.” Witness, for example, the talk of a breakup
of Facebook given its dominant market position as a
result of its acquisition of Instagram and WhatsApp.
None of this will happen fast (“history moves
slowly”); wealth taxes may appear in the interim.
But there is a message for long-term investors: some
people are paying very high multiples for companies
with “moats” (high barriers to entry). If those moats
are vulnerable to government action and hence to
competition, those people “may be disappointed.”
The Myth of Capitalism: Monopolies and the Death of
Competition by Jonathan Tepper with Denise Hearn is
out now (published by John Wiley & Sons).
28 December 2018 MoneyWeek
24 Cover story

Invest in helium,
biotech, and UK
small caps in 2019
We asked our contributors to choose their favourite
investment ideas from around the world for this year and
beyond. Here’s what they came up with
Richard Beddard
XP Power (LSE: XPP) is top of my buy
list. It manufactures power converters
that do a similar job to those used
in household appliances and home
computers: they change electricity
from the mains supply (alternating
current) into the direct current used by machines. XP
Power’s converters are more sophisticated because
they are used in complex industrial machinery and
medical equipment. Failure of these machines would
be expensive, perhaps even deadly, so the power
converters are made to a high specification.
The big risk facing companies that supply
industrial equipment and components is the capital
equipment cycle. During recessions manufacturers
reduce investment in new equipment to save costs,
which affects the revenue and profitability of their
suppliers. XP Power, however, has sustained high
levels of profitability. This is partly because it would
Will we be in for a rude awakening in 2019?
be expensive for a customer to substitute a converter
once it is designed into a machine; partly because XP compared with gains of 32% and 8% in the FTSE
has been growing market share thanks to its small, Global 100 and UK All Share Indices respectively.
efficient, reliable designs; and also a result of the Why? Because Barclays has suffered huge fines for
company selling into stable sectors such as healthcare, historic fraudulent activity such as PPI mis-selling and
as well as a variety of industrial markets that peak and multiple inquiries into murky affairs such as share-
trough at different times. rigging. These are over, although doubts about CEO
That does not mean XP Power will grow profits Jess Staley linger. Still, released from these historic
every year, but it has become the market leader in the drags, earnings should soar while simplifying the
US and Europe, which bodes well for its long-term business will also improve profitability. Trading at
prospects. With the largest technical sales force in about 65% of book value, the stock is cheap.
the industry seeking a growing share of the business The current yield is just under 3%, but it should
of its blue-chip customer base, and XP’s control of increase dramatically in 2019 to more than 4%.
design and manufacturing at its factories in China and Earnings per share should rise to at least 24p, giving
Vietnam, rivals can do little to challenge it. The shares a prospective multiple of 6.6 times, and in the wings
are available at the knock-down price of around £22, are activists such as Sherborne Investors urging more
which values them at 16 times earnings on a debt- cash to be returned to shareholders. Tipping a £27bn
adjusted basis. company to rise in weak markets may seem eccentric
but there’s the fat dividend and every dog has its day.
Jonathan Compton
I am sure that 2019 will be a bad Stephen Connolly
year for global investors. The I plan to invest in emerging markets
reason is simple. Markets have equities in 2019. They are bombed
“Now the underestimated the impact of ending out and the earnings outlook is
quantitative easing (QE, or money broadly attractive. This year’s slide
tide has printing). Since 2008 the major central was due to US dollar strength and
turned and banks have splurged more than $12trn into the global trade tensions. I will be cautious and
financial system, benefiting owners of assets such as allocate only 5%-7.5% of my portfolio to the asset
governments shares, bonds and property. Now the tide has turned class, but while it may not prove profitable in 2019,
will be and governments will be competing to suck money out I’d be surprised not to make some decent returns over
of markets. The good times are over. the medium term. I will buy the JP Morgan Emerging
sucking I therefore want a company priced below its true Markets Investment Trust (LSE: JMG) valued at more
liquidity value, that pays a decent dividend, has rising earnings than £1bn and on a 12% discount. It is overweight
and may be forced to give even more to its owners – Brazil, India and Indonesia and underweight China.
out of the you and me. Barclays Bank (LSE: BARC) fits the bill. Much comes down to the US dollar – a weaker dollar
markets” Five-year performance has been dire, down 40% should lift sentiment. When in November it finally
MoneyWeek 28 December 2018 moneyweek.com
 Cover story
©Getty Images
seemed to dawn on the Federal Reserve that strong US
domestic growth earlier this year was the result of tax
breaks and therefore unsustainable, its enthusiasm for
dearer money cooled very quickly and it hinted it was
close to the end of the interest-rate tightening cycle.
That should subdue the dollar. Despite a few months
of détente expected in the US/China trade war, there’s
no guarantee there will be any resolution soon,
although I believe both sides would prefer to get this
over with as quickly as possible.
To put this investment in context, I am heavily
invested in US equities and am comfortable with
corporate America. My focus is long-term quality.
Throughout 2018 I have been holding 25%-45% of
my portfolio in cash and this can partly be used to
fund emerging markets.
Rupert Foster
India will hold a general election in
April and May 2019. The ruling
BJP party has just lost three state
elections but it looks very likely that
on a national level it will get back
in with a reduced majority. Narendra
Modi, the BJP leader, has implemented enough
structural reforms in his first term to be allowed
another term. I think it highly likely that he will pick
up the pace of reform. The “speed of change” is often
the key variable that defines an emerging market’s
performance. The other two are a weak dollar and
good investment flows. As the Fed moves to interest
rate neutrality in the first half of 2019, we may well
start to see some dollar weakness emerging – much
to the benefit of all emerging markets. Meanwhile,
year in, year out investors keep piling into India –
moneyweek.com
25
to the tune of $13bn in the last year. These money
flows are mirrored by large corporate investments as
“Buy India
overseas companies rush in. As reform continues this in the first
will only accelerate, since the main impediments to
direct investment in India are the country’s ossified
quarter ahead
and corrupt legal and bureaucratic structures. In of a likely
addition, India is at the very early stage of emerging as
an exporting nation, a trend that will only accelerate.
reduction in
A good way to play India is through a UK investment interest rates”
trust such as India Capital Growth (LSE: IGC), which
focuses on promising mid caps. Trading at an 8%-9%
discount to its net asset value (NAV), it looks great.
Buy it in the first quarter ahead of the election and
probable monetary easing.
Dominic Frisby
Every year some niche commodity
seems to become a hot investment in
the Canadian resource markets. This
year it was marijuana. Last year it
was cobalt. The year before that it was
lithium. Whether it’s rare earth metals,
potash, graphite or uranium, the thing about these
mini-bubbles, even if they turn out to be just that, is
they all have a compelling underlying story.
The most compelling story at present is helium.
It has a multitude of uses beyond balloons, most
of them in tech. It’s needed for high-capacity hard
drives in data centres; in the production of barcode
readers, computer chips, semiconductors, LCD panels
and fibre-optic cable; as a refrigerant in cryogenics
research; and as a coolant for nuclear reactors and
MRI machines. Demand is rising while supply (Qatar
and the US are the two biggest producers) is in decline.
Roughly 15%-20% of global demand is met by the US
selling off its national reserves, but within two years
these will be fully liquidated. Cue the rush to find
more.
There are four listed helium stocks in North
America. Three have been disasters this year, all for
internal company reasons. However, a new kid on
the block, Desert Mountain Energy (TSX.V: DME)
has staked out land in Arizona (now dubbed “the
Saudi Arabia of helium”), raised money and is now
preparing to drill in the spring. It’s a tiny-cap energy
play. Anything can happen. If the drilling works,
you’ll make a lot of money. If not, you’ll lose it all.
Max King
With a US-led easing of monetary
policy, a lower oil price and equity
valuations somewhere between
reasonable and cheap, I think 2019
will be a much better year for equity
investors than 2018. In the performance
tables, the UK competes with the eurozone for the
wooden spoon, after 18 consecutive months of fund
outflows totalling £7.4bn. For international investors,
the UK remains their least popular destination.
Unusually, UK smaller companies have done even
worse, with the Numis small-cap index returning
-11% to the end of November, compared with -6.5%
for the FTSE All Share. Over the previous five years,
small caps outperformed by a compound 4%, broadly
in line with the long-term average. Moreover, the
average small-cap investment trust outperformed the
Numis index by a compound 2.4%.
The glib explanation for the underperformance of
UK smaller companies in 2018 is that they have far
less exposure to overseas sales than larger companies
and therefore are more exposed to Brexit. Yet smaller
companies have also underperformed in the US and
Continued on page 26
28 December 2018 MoneyWeek
26 Cover story
“The UK Continued from page 25
market Europe, so it’s a global phenomenon. Still, with bad
should do news discounted and pessimism at an extreme, the
UK market should do better in absolute and relative
better in terms in 2019, and smaller companies should again
absolute and outperform. If so, investors in small cap trusts
could benefit from the UK market doing well, from
relative terms smaller companies doing better, from small cap
in 2019” trusts outperforming and from discounts to net asset
value narrowing. The following smaller companies
trusts are all worth backing: Aberforth (LSE: ASL),
BlackRock (LSE: BRSC), Invesco Perpetual (LSE: IPU),
JP Morgan (LSE: JMI), Henderson (LSE: HSL) and
Standard Life (LSE: SLS).
Lucy Macdonald
Investors have started to price in a
peak in liquidity and the potential for
decelerating growth: witness rising
credit spreads, a flattening yield
curve and the de-rating of cyclical
stocks. This has meant an environment
of lower returns with higher volatility. The reduction
in liquidity driven by the US Federal Reserve and
now the European Central Bank will remain the
dominant headwind for asset markets over the next
year. The business models of the FAANG stocks and
the stability of the global trading regime are further
concerns.
Trade fears may dissipate in the short term.
However, the potential for friction between the two
major economic powers remains in the longer term.
Any alleviation of trade fears would benefit European
and Asian stockmarkets relative to the US.
One stock we believe should perform relatively
well in this challenging environment is Roche, which
is emerging from a period of transition from its
blockbuster oncology franchise, Avastin, Herceptin
and Rituxan, where the threats from biosimilars
appear to be well discounted in the valuation. It
has secured a new leadership position with Merck
in immuno-oncology and has a strong diversified
pipeline with 17 new molecular entities in trials. Most
interesting is their developing neuroscience portfolio
addressing Huntington’s, autism and Alzheimer’s,
while new drugs Ocrevus, Alecensa, Hemlibra and
Venclexta have exceeded expectations. The balance
sheet is strong and the stock yields more than 3%.
Steve Russell
Financial markets are gradually
embarking on a regime change.
Low inflation and low interest
rates are gradually being eclipsed
by higher inflation, higher interest
rates and higher political risk. Against
a background of rising inflation pressures and higher
interest rates, the search for yield, driven by low or
zero interest rates, is likely to be replaced by a search
simply for the safe return of capital.
In many ways this backdrop is similar to the late
1960s, when a time of low inflation and concentrated
stock-price appreciation came to an end as inflation
returned to global markets. Eventually this leads
to loss of real (inflation-adjusted) value even in
government bonds and cash, the assets that initially
appear to be safe havens in the transition.
Central banks now face a dilemma. They are
“damned if they do” raise interest rates, as growth and
inflationary pressures would indicate, as this is likely
to break markets, and eventually economies, that are
addicted to low interest rates. At the same time central
banks are equally “damned if they don’t” raise rates,
MoneyWeek 28 December 2018
as this will reveal their inability to counteract rising
inflationary pressures.
Unsurprisingly, recommending where to invest in
this environment is rather difficult, as such conditions
could see financial assets give back much of the gains
made since the credit crisis.
Within equity markets, therefore, we are tempted
to seek opportunities where investors are already
discounting far from rosy outcomes, such as in the UK
(owing to Brexit and political uncertainty) and Japan.
Interesting stocks here are Tesco (LSE: TSCO) and BP
(LSE: BP); Games Workshop (LSE: GAW), a maker
of miniature war games; and software and computer
services group FDM (LSE: FDM). The last two are
potential mid-cap growth stocks currently suffering
from the curse of being quoted or operating in the UK.
Other areas worth exploring could be historically
capital-intensive industries such as chemicals
and manufacturing, where low valuations and
expectations are matched by low levels of recent
capital investment, creating fertile ground for
surprising output-price increases. US chemicals
multinational DowDuPont is a case in point (NYSE:
DWDP). While US equities remain the only asset class
in positive territory this year, we are cautious over
the outlook for a market where corporate credit has
reached unprecedented levels and share buybacks
appear to be the only remaining net source of demand
for stocks. One area that may be interesting is that
of media content. So Walt Disney (NYSE: DIS), with
its impressive collection of film and TV brands, and
French media conglomerate Vivendi (Paris: VIV) look
attractive to us, especially compared with the likes of
Netflix, which is spending vast amounts of cash that it
does not have to create just such content.
David Stevenson
There’s a decent chance that we
are entering what is called a new
volatility regime in investing. This
sounds terribly jargon-heavy, but the
idea is simple. Markets have become
more turbulent and the general (bullish)
sense of direction has broken down. On some days
this means that investors are skittish, on others they
are more optimistic.
In this new environment, measures such as the Vix
– which tracks the ups and downs of the benchmark
S&P 500 index – tend to tick up. Because the Vix
measures volatility, which reflects nervousness, it is
also known as the “fear gauge”. In this environment
it will often move consistently above 20. This new
regime might resolve itself in weeks, months or
possibly even years. The market could subsequently
regain its confidence and start trending upwards or it
could lunge into a proper crisis. But whatever happens
next, it is reasonable to expect more turbulence.
That could be good news for the spread-betting
businesses, a core component of the UK financials
sector. The biggest and best operator is IG Index but
I find myself watching the share price of Plus500
(LSE: PLUS) instead – I regard it as the brash upstart
whose shares are now dirt cheap. Most of the big
spreadbetters have seen their share price hit hard by
a tougher regulatory environment (much deserved in
my view) which is forcing them to concentrate on a
smaller core of more professional clients. These hugely
successful businesses have also been forced to focus
on global expansion, and in IG’s case new products
such as robo-portfolios and ordinary share dealing.
One last ferocious headwind, relevant to Plus500 in
particular, is the bear market in cryptos. Plus500
had built up a valuable franchise as a way of playing
the relentless march upwards in the price of bitcoin
moneyweek.com
 Cover story 27
and Ethereum. That trade has now evaporated and
Plus500’s share price has crashed back.
But don’t lose sight of the fact that spread-betters
are a brilliant hedge on market volatility – they make
money in a more turbulent market. And Plus500 is a
fearsome digital marketing machine whose shares are
now lowly valued – the forward PE is probably around
five to six and the dividend could easily stay in double
digits in percentage terms for the next few years.
Remember that above all, Plus500 is still an online
cash machine. Overall I’d be an enthusiastic buyer if
the share price dipped below £12.50 a share, mainly
as a hedge on this new market volatility regime I have
described.

Mike Tubbs
Biotechnology will be the major
growth technology of this century.
It is spearheading a new generation
of drugs based on antibodies and
immunotherapies and it has also led
the development of gene and stem-cell
therapies. It is also leading to revolutions in crop- and
farm-animal genetics. Last year I recommended a drug
discovery biotech, Vertex Pharmaceuticals, which at
the time of writing is up 9.7% on the year in US dollars
(and up 18.7% in sterling while the FTSE100 is down
12%). Next is well-managed and cheap
This year I am staying with biotechnology. However,
and that’s pricing in the favourable currency effect
I am recommending a “picks and shovels” play. This
of owning it as a sterling investor (it’s denominated
“I can’t
term stems from the California gold rush, and alludes to
the strategy of buying shares in suppliers to an industry
in dollars, which the pound has fallen against this think of a
year). However, I’d hang on to it, for reasons that my
rather than the sector itself. This can shield investors
colleague Andrew goes into below.
festive season
from swings in sentiment towards the sector. Given that
markets are far more volatile now than last year, this
For this year’s tip, I’m going for something rather that hasn’t
more staid than junior gold miners – UK clothing
seems a prudent approach.
retailer Next (LSE: NXT). The headlines are already
involved
I am recommending a company called Abcam
(Aim: ABC). Abcam is the global leader in primary
yelling about a bloodbath on the high street. That’s stories of a
not at all unusual for this time of year. I don’t recall
antibodies used for biotech research and in the digital
a festive season that hasn’t involved endless news
high-street
marketing and e-commerce technology needed
to speed them to researchers worldwide. It is also
stories about how awful business has been. But throw bloodbath”
in confusion over Brexit, a nasty profit warning
expanding in related technologies such as proteins,
from online “fast-fashion” group Asos, and the
reagents and kits for biotech experiments that
more general market downturn, and we’re at full-on
markedly reduce preparation time for treatments.
panic stations now. Little wonder. Fashion is a fickle
Abcam is called the “Amazon of antibodies”
industry. Tastes change. The weather is a constant
because its superb website sells not only its own
source of volatility, and the industry is still in the
antibodies developed in-house (such as its proprietary
middle of rampant, internet-created disruption.
RabMAb range) but also those from partner
So why am I buying Next (indeed, I already own
organisations. It delivers its products to 130 countries.
it)? For two reasons. One, it’s well-managed. In a
Furthermore, every antibody or product listed on the
volatile industry such as this one, that’s the best way to
site is quality-controlled, with a detailed technical
choose between companies. Indeed, it’s the key reason
datasheet to give its research customers full confidence
I’d favour Next over its nearest high street rival (in
in the item.
clothing terms), Marks & Spencer. M&S has suffered
Abcam is a substantial company with 2018
from mediocre, unfocused management for several
revenues of £233m and market cap of £2.2bn. It
decades now, whereas Next is the polar opposite.
targets revenue growth of 20-25% per year. The share
Second, it’s cheap. The dividend yield is about 3.7%, it
price is currently around 1,060p, giving a trailing
trades on a price/earnings multiple of around ten, and
price/earnings ratio (P/E) of 35 using the 30.2p
the balance sheet is sound. I don’t expect it to shoot
earnings-per-share (EPS) figure for the year to the
the lights out. But if Brexit goes even a little better
end of last June. Operating profits rose by 25% last
than expected, then Next will benefit from rallying
year and brokers estimate a 19% rise for 2019 so EPS
sentiment towards British assets. If it doesn’t, Next is
should rise substantially, giving a higher price and/
at least a survivor.
or lower P/E. Total dividends of 12p were declared in
2018 for a yield of 1.1%. The shares are down 30%
Andrew Van Sickle
from their peak of 1,539p in early September.
We could be heading back to the
1970s in 2019 – though not in the way
John Stepek you might expect. My prediction is
This time last year I tipped gold-
not Jeremy Corbyn but stagflation.
mining stocks, via the VanEck
Consider the rapidly mounting
Vectors Junior Gold Miners
evidence. On the one hand, inflation
exchange-traded fund (LSE: GDXJ).
is stirring now that tight labour markets are finally
Frankly, it’s been an appalling tip
on a one-year basis – down 7.6% from
12 January (when the tip came out) to 19 December, Continued on page 28
moneyweek.com 28 December 2018 MoneyWeek
28 Cover story
Continued from page 27
delivering serious wage inflation. In Britain, wages
excluding bonuses grew by an annual 3.3% in the
three months to October, the fastest pace since 2008.
Spain has just announced the biggest hike in the
minimum wage in more than 40 years. Deutsche
Bank, pointing to a gauge of US hourly earnings
showing a 3.1% year-on-year increase, says that if the
Federal Reserve ignores this trend, “we run the risk of
returning to unanchored wage inflation”.
Spoiler alert: the Fed will ignore the trend because
it’s looking the other way. The US economy, like the
eurozone and emerging markets, is slowing down.
Global GDP growth has “hit a major air pocket”, says
UBS, which reckons it has slowed from 4.5% at the
start of 2018 to about 3% now.
Slowing growth plus rising inflation equals
stagflation. The 1970s showed starkly what that does
to asset prices. Equities do better than bonds, but once
inflation really gets going (around 4%-5%) companies
find it harder and harder to pass on price rises and the
prospect of higher eventual interest rates to squeeze
out inflation lowers valuations.
In these circumstances, big multinationals boasting
decent cash piles for dividends and providing
essentials such as petrol and food will probably
outperform other equities. But the best bet is gold.
The yellow metal has risen twice as fast as consumer
prices in the US since the end of the gold standard,
as WirtschaftsWoche points out. And it’s not just a
reliable store of value: bad news tends to give it a big
boost. Stagflation is very bad news indeed, especially
because it is the last thing most investors expect. A
gold-backed exchange-traded fund tracking the gold
spot price is a good way in: consider ETFS Physical
Gold (LSE: PHAU).
Merryn Somerset Webb
The market volatility of 2018 has
produced all sorts of interesting
discounts in the investment-trust
sector – you can find many once well-
loved ones trading at 10% discounts
to net asset value (NAV), for example.
Look at some of the less well known ones and there is
even more bang for your buck.
One for niche investors to look at might be tiny
(market cap £54m) Menhaden (LSE: MHN). It listed
in July 2015 with a plan to focus on investments
in firms using resources efficiently as well as in
renewables firms (both listed and private).
Things started badly with some disastrous
renewable energy investments. However the trust has
pulled back from the brink. A new chief investment
officer joined in March 2016 and refocused the
already concentrated portfolio (there are fewer
than 20 holdings, around half listed) towards value
investments with the same thematic bias. Since then
the NAV has risen by 16% but the share price fallen
more like 12%, leaving the shares hovering on a
discount of 25%-30% to NAV.
This is interesting right now for one particular
reason – the trust has a continuation vote coming
up in May 2020. If the discount doesn’t narrow,
investors could force the fund to close down with a
view to getting paid out something close to NAV in
cash. Menhaden is hard to trade and fairly expensive
(ongoing charges are just over 2%). But it’s also
interesting. One for the brave and patient.
The rest of us might also use the return of discounts
to look to Bruce Stout’s Murray International Trust
(LSE: MYI). This has long been one of our favourite
funds with proper emerging market exposure , and the
MoneyWeek 28 December 2018
©iStockphotos
Gold will get a boost from stagflation
excellence of its manager has often had it trading on a “The
premium. No more. At the moment it is on a 4%-5%
discount. If you think there is a reasonable chance that volatility of
emerging markets are oversold and will bounce nicely 2018 has
if (when?) the Federal Reserve softens its interest-rate
policy, this is an excellent opportunity to buy into produced
Stout’s stockpicking skills. juicy
Cris Sholto Heaton discounts
I try not to spend too much time in the
fretting about the overall direction
of the market. But the recent investment
behaviour of almost every stock in trust sector”
my portfolio and on my watchlist
makes me suspect that anything one
buys right now is more likely to go down than up over
the next year.
So I favour looking for good-quality stocks that
have already fallen back to the point where valuation
may offer a bit of a cushion against a further
downturn (although they would still not escape a
full bear market unscathed). Paying up for growth is
perilous in this climate, as is buying low-quality stocks
because they look cheap.
That kind of value is still scarce, but there are a
few European industrials that are starting to look
more attractive. I suggest having a look at TKH
Group (Amsterdam: TWEKA), a mid-cap industrial-
technology firm that focuses on communications
infrastructure, manufacturing automation, and
building security and monitoring. None of that sounds
glamorous, but all these markets should offer long-
term growth potential. TKH trades on a consensus
forecast price/earnings ratio for 2018 of 15.5 and a
dividend yield of 2.9% (UK investors will lose 15% of
that to Dutch withholding tax) – not outright cheap,
but fair.
My suggestion last year was Tiger Brands, a South
African consumer-staples firm, which has performed
very badly. Sluggish consumer spending and rising
costs due to the weak rand played a part, but far worse
was the handling of a listeriosis outbreak traced to its
processed-meat business, which lead to the death of
roughly 200 people. I’ve been giving the firm time to
show it’s getting back on track, but I’m rapidly losing
faith in both management and strategy. The stock is
likely to exit my portfolio in my new year review.
moneyweek.com
 Investing in property 29

The battle to disrupt estate agents

For a widely loathed profession, traditional estate agents appear surprisingly durable, says Sarah Moore
Sarah Moore
Investment editor

O nline estate agent eMoov went

into administration this month.
Its demise is quite significant in the battle
of the internet-based estate agents – it was
the only decent-sized rival to sector
leader Purplebricks (Aim: PURP).
Just six months ago eMoov had entered
into a £100m three-way merger with
rival Tepilo and online letting agent
Urban.co.uk. However, part of the £15m
in new investment pledged at the time of
the deal never materialised, said eMoov’s
chief executive, Russell Quirk.
In effect, eMoov simply struggled to
compete with established traditional
agents against a backdrop of a challenging Satisfied customers: but how many others are willing to take the plunge?
property market. In the 12 months prior
to its collapse it had received 8,000 new rest made by the Australian and North agent Countrywide. So it’s clear the model
instructions – representing about 0.5% American arms). However, that was can work, which bodes well for its overseas
of the market in 2018, according to less than expected, while group losses expansion, assuming it doesn’t overreach.
consultant TwentyCi (compared with 8% were greater than forecast – increasing But that’s where the outlook clouds
for online agents overall). Just more than to £25.6m, from £11.4m previously, as a over. As Phil Oakley of Investors
half (53%) of those instructions generated £4m profit in the UK unit was offset by a Chronicle notes, Purplebricks has a lot
sales, subject to contract. loss of more than £30m at the other two of fixed overheads, which means it has
businesses, driven by heavy investment in decent “operational gearing” – a rise in
Purplebricks steps in marketing. Markets were also concerned instructions “can lead to a rapid growth
eMoov’s demise shows that the internet as the board reduced its predicted revenue in profits”. But this cuts both ways. The
still hasn’t revolutionised the way we buy for 2019 a little. The share price slid 11% UK property slowdown has hit all agents
property in the UK. on the day, taking hard this year, but digital agencies could
Purplebricks now “A serious housing-market them down to around be the most vulnerable. For example, in
has an even clearer 130p at one point, September Connells Group (one of the
run at the market, slump could see consumers 68% below where they UK’s largest estate agencies) shut its online
and has offered to return to traditional agents” stood at the beginning offering, saying the model wasn’t “the
sell the houses of of the year. right solution for the customer”. It’s one
existing eMoov customers free of charge. Analysts’ views are mixed. Purplebricks thing to pay an upfront fee instead of a fat
But despite being the largest online agent spends a lot on marketing but it seems commission in a “hot” property market,
by a long shot, Purplebricks has had a to have paid off in the UK, notes Lex but it’s quite another in a sluggish market
mixed few years itself. in the Financial Times. The group does with no guarantee of selling your property.
For the six months to the end of not disclose sales volumes, but based on If the housing market deteriorates further,
October, revenue rose by 75% from its reported £5.4bn in house sales, Lex warns Oakley, consumers might shift back
£40.1m to £70.1m (around £50m of reckons it sold around 24,000 houses in to “commission-based agents”, hurting
which was generated in the UK, with the the period, a bit more than high-street Purplebricks’ profitability.

Guess the price... The Gatehouse, Shipton Court, Oxfordshire The £11.25m Cannes fortress
A former gatehouse at the
entrance to a Jacobean “One of the most secure
mansion in a village in the homes in the world” – a
Evenlode Valley, an Area of luxury estate on the
Outstanding Natural Beauty. French Riviera – is on
The three-bedroomed, sale for £11.25m, says
detached house has private Tony Allen-Mills in the
gardens and a Mulberry lawn Times. Bulletproof
that overlooks the grounds of glass, cameras and
©Getty Images

the Jacobean mansion. It has escape tunnels are

French doors leading from the among the features that The once-happy couple
dining room onto an enclosed were designed to
terrace and a further private protect the children of gained custody of the
£775,000. Butler Sherborn, 01993-822325.

garden area and a garage, multi-millionaire Daniel
with a right of access across Giersch, 44, during a
the driveway to the Mulberry ten-year transatlantic
lawn, which was once the custody battle with US
orchard to Shipton Court. actor Kelly Rutherford,
But can you guess the asking 50. In 2012, Giersch
price? Answer on the side returned to Monaco
of this box. after his US visa was
revoked. However, he
children and kitted out
the high-security estate
for fear they might be
taken back to the US
without his consent.
Yet they never actually
moved in, and with the
case settled, Giersch is
selling the estate.

moneyweek.com 28 December 2018 MoneyWeek

30 Personal view

Cash-rich companies that If only you’d invested in…

crunch the competition

Evraz Plc (LSE: EVR)
Share price in pence
600
550

A professional investor tells us where he’d put his 500

450
money. This week: Algernon Percy of Waverton 400
Portfolio Fund highlights three quality growth stocks 350

Waverton’s approach is to look for
companies not only capable of consistently
generating surplus cash from operations,
but also of growing these cash flows
through a sustainable competitive
advantage. That means we tend to favour
durable business franchises that can result
in the long-term compounding of returns
for shareholders: we choose quality
growth companies over deep cyclicals.
Three examples that have been added to
the portfolio this year illustrate this
theme well.
Accounting in the cloud
Intuit (Nasdaq: INTU) develops tax,
accountancy and payments software
for smaller companies, accountants and
consumers. Intuit’s products are based in
the cloud, making it easy for companies all
over the world to access and adopt.
The need for regular accounting and the Constantly innovating
growing importance of being compliant
with new legislation mean Intuit sees a
great deal of repeat business and enjoys
good pricing power.
As a result, it
generates cash with “Keyence is extremely well structural trend
low capital intensity, placed to profit from the towards
D J F M A M J J A S O N D
2017 2018
US. Management has been successful in
integrating additional services into the
Evraz (LSE: EVR) mines iron ore and
group’s offerings, including installation
coal, and also produces steel for
and training workshops, which improve construction materials such as beams
customers’ loyalty. We think Home Depot and rails in Russia, North America and
should profit from a structural increase South Africa. The firm has headquarters
in home renovations in the US as housing in London; Roman Abramovich, the
supply falls and prices rise. This means Russian-Israeli billionaire and Chelsea
fewer Americans will be able to buy houses FC owner, has a 3% stake. Evraz saw
and will instead focus on renovation. profits skyrocket to US$1.1bn in the first
Not only does the market backdrop half of 2018, up from US$86m the
previous year, thanks to its efforts to
bode well, but Home Depot will also avoid
cut costs and reduce debt. Impressed
the competitive threat from online retailers investors have propelled the shares
that, say, clothing stores face owing to to 480p, marking a 40% increase since
the bulky and specialist nature of many 1 January.
of the items it sells. It is important to bear
in mind that the US DIY sector is very
different from that in the UK, where
Be glad you didn’t buy…
retailers are apt to be squeezed by Dignity Plc (LSE: DTY)
their suppliers. Share price in pence
2000
1800
Finally, the Japanese industrial technology 1600
company Keyence (Tokyo: 6861) is the 1400
worldwide market leader in certain 1200
categories of sensors used in automation. 1000
There is a strong 800
600
automation 2017
D J
2018
F M A M J J A S O N D

and the company and Keyence is

has net cash on its trend towards automation” extremely well placed
balance sheet. While to benefit from this. Birmingham-based funeral directors
Intuit already has a dominant market The company works closely with its Dignity (LSE: DTY) has had a difficult
share in the US through its consumer- customers to develop specialised solutions year. January’s funeral-sector price war
forced executives to knock a quarter off
focused application, TurboTax, America to meet their needs. Keyence can then its prices, a move that halved the value
nonetheless remains underpenetrated; leverage this spending on research and of the stock in a single day. It has
there is also enormous opportunity in development to provide similar solutions to plummeted by 62.3% so far this year.
other markets such as the UK, for example, other clients. So the company is constantly Underlying profits fell by 14% to £68.6m
where its QuickBooks brand for small innovating; of all its products, 30% have in the first nine months of the year,
firms is taking market share from Sage. been made in the last year and 90% in the although a gain in market share
last three years. Each component makes up provided some cheer. Prospects still
America’s renovation boom a relatively small part of customers’ overall look bleak, however, now that the
Home Depot (NYSE: HD) is the world’s spend; clients are therefore not too price- Competition and Markets Authority
(CMA) is probing “exploitative” pricing
largest home-improvement retailer, with sensitive. Keyence also has significant in the UK funeral sector.
an impressive 40% market share in the opportunities overseas.
©The Telegraph 2018

MoneyWeek 28 December 2018 moneyweek.com


European politics, the tech meltdown, South Africa’s recovery and US interest-rate policy were key themes
this year. They were steered by the successes and failures of these pivotal people. Jane Lewis reports
Theresa May
Britain’s
prime minister
has been
repeatedly
“humiliated”
both “at
home and
abroad”, says
The Guardian. But when
your back’s against the wall,
“embrace humiliation” is a
useful mantra – after a while,
you become impervious to it.
Thus, having suffered the
stuff of nightmares – from the
coughing/collapsing scenery
conference speech, to the
“sympathetic” murmurs about
health (mental and physical)
from “concerned” colleagues,
May has emerged personally
stronger, with arguably more
sympathy in the country. The
Johnson clan, it seems, doesn’t
have the monopoly on Churchill
when it comes to one key quote:
“Keep buggering on.”
May at least seems
unmotivated by any further
political ambition than getting
her Brexit plan through
parliament, says the Financial
Times. That plan is certainly
flawed. But the pragmatic
view that it cannot for the
moment be bettered may well
gain ground the closer we get to
29 March.
“Diplomacy is the art of
letting other people have your
way,” observed the head of the
Foreign Office recently. Do the
deal, and then let the experts
fudge it as they do best. As the
PM seems to have grasped, it’s
the British way.
Can Jerome Powell withstand Trump’s assault?
“Another rally has fizzled,” says
Arie Shapira on Bloomberg. Fed
chairman Jay Powell (pictured)
should have listened to the real
expert before hiking US rates
for the fourth time this year in
the week before Christmas. As
President Trump observed in a
series of tweets before the
decision, it is astonishing that
Powell was “even considering”
a hike (let alone winding in QE)
given that “the outside world is
blowing up around us, Paris is
burning and China way down”.
Trump’s concern that the Fed
“will hurt the stockmarket he’s
tethered his presidency to and
moneyweek.com
Profile
Faces of 2018
Cyril Ramaphosa
When Cyril
Ramaphosa
became
South
Africa’s
president in
February, he
was held up
by many as a “saviour”, says
PanAfricanVisions. Nearly a
year on, has that “Ramaphoria”
turned to “Ramaphobia”? Not
quite, but it has hardly been
plain sailing.
In September, the economy
fell into its first recession for
almost a decade, “heaping
pressure” on Ramaphosa,
who’d pledged to restore
confidence following the
kleptocratic regime of his
predecessor, Jacob Zuma.
The new president – who
spent his years in the political
wilderness building a large
investment company – is also
mired in “land expropriation
without compensation”,
arguably the country’s “greatest
socioeconomic flashpoint”, says
The South African.
He dismayed his pro-
business, pro-enterprise
supporters by backing the
policy, with its worrying
implications for property rights,
in the summer. Opponents say
“he is a prisoner in an open
prison” – forced to pander to
more hardline ANC factions.
On the plus side, Ramaphosa
can always fall back on his
sharp brain and legendary
common touch. With the 2019
elections looming, he is still “the
ace in the ANC pack”.
pump the brakes on... economic
growth” is all the more ironic
since he himself selected Powell
over “dovish” Janet Yellen, to
lead America’s central bank, as
Vox points out. The president
appears to have overestimated
the compliant nature of his man.
This week Powell went ahead
and raised the benchmark
interest rate again; he didn’t
even nod to market turmoil.
Under Powell’s predecessors,
the markets had come to count
on the Fed easing if they were
jittery. It seems Powell is made
of sterner stuff.
You might argue Trump has a
Matteo Salvini
Italy’s far-right
interior
minister is
“the most
feared man
in Europe”,
says Time.
Matteo
Salvini’s rocketing rise this
year threatens to “upturn
a political system” already
reeling from Brexit. A former
Milanese communist turned
ardent nationalist, Salvini’s
League party linked up with
others on Europe’s extreme
right – including Marine Le
Pen’s National Front – before he
came into government. He has
since toned down the rhetoric,
but opponents accuse him of
cosying up to Russian president,
Vladimir Putin.
Salvini “hardened” his
position on Europe when the
recent gilets jaunes protests
forced promises of increased
spending from the French
president, Emmanuel Macron,
says Bloomberg. Italy has long
complained that Paris gets
special treatment from Brussels.
The stand-off with Brussels
“could play into Salvini’s hands”
if it triggers new elections next
year, notes La Repubblica.
Although his League is
technically the junior member
of the governing coalition, polls
show it overtaking Five Star as
Italy’s most popular party. This
could be Salvini’s chance to see
off the lame-duck compromise
PM, Guiseppe Conte, and grab
power for himself. A worrying
prospect for Europe.
point, says Nils Pratley in
The Guardian. US
growth may be
slowing already
and there is “a
decent case” for
taking a break
from rate rises.
“Yet it remains
extraordinary that a
US president could try
to pressurise the Fed in this
way.” In the long run, “Trump’s
sniping can only do harm” if it
affects market expectations.
Powell should tell the president
to zip it (see also page 11) .
Powell isn’t “a trained
31
Mark Zuckerberg
Talk about a
turbulent
year for
Facebook,
says
CNBC.
In 2018,
the once
impregnable social media
giant has “endured” multiple
scandals, a data breach affecting
some 87 million people, stalling
growth in key markets and “its
worst stock performance since
going public in 2012”. Founder
Mark Zuckerberg’s face has
been all over the pre-Christmas
press billed as 2018’s biggest
loser, having shed some $15bn
of his private fortune.
Some see this year’s downfall
as payback for a company
that has long taken a cavalier
attitude to its users. Asked
when young why so many were
prepared to entrust him with
their personal data, Zuckerberg
replied: “because they’re ‘dumb
f***s’”. Nonetheless, the
34-year-old has drawn some
sympathy during his annus
horribilis. This was “Mark
Zuckerberg’s growing up
moment”, observed CNN soon
after he was dragged in front
of Congress in April to explain
Facebook’s imbroglio with the
murky political consulting firm,
Cambridge Analytica. Who
could have predicted in that
Harvard dorm in 2004, that
an application set up to attract
campus “hotties” would drag its
callow founder into the world of
dirty US election campaigns and
Russian surveillance?
economist” – a lawyer, he
cut his teeth on Wall
Street instead, which
may be why Trump
thought he’d be
more amenable to
markets. He has
indicated that he
will slow the pace of
rises next year. But if
he sticks to his hawkish
guns, we can expect more
tension with the White House.
Can “Mr Ordinary”, as The Wall
Street Journal once dubbed
©Getty Images
him, withstand a full-throttle
Trump assault? We may find out
next year.
28 December 2018 MoneyWeek
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 Travel 33

The recipe for new year wellness

Madeleine Taylor looks at four new or reopened spas to recharge your batteries
W ith Christmas only
just over and new year
celebrations looming, you
can be forgiven for feeling
exhausted. But help is at hand.
“It has been scientifically
proven that the Nordic
tradition of hot and cold
plunging improves mood and
reduces stress,” says Leo Bear
in The Daily Telegraph.
With remedies such as
cryotherapy and ice yoga
becoming more popular,
Arctic Bath, a spa retreat
due to open in the spring,
30 miles south of the Arctic
Circle, “feels way ahead of the
curve”.
This small-scale retreat in
Swedish Lapland, near the tiny
town of Harads, is set to be one
Luxury well-being at Chiva-Som
of 2019’s coolest spas. Its hub
is a “free-floating Narnia-like
nest” anchored in the Lule Arctic Bath: a Narnia-like nest
River, with a chilly plunge “Chiva-Som’s
pool at its centre surrounded reopening was a
by sauna cabins, a treatment
room (“try the berry oxidant cause for
infusion facial”), a restaurant celebration among
and a relaxation lounge. “All
very Scandi.” And while you’re its many devotees”
engaged in all this relaxation,
you can look up and admire the
Northern Lights. devotees. De Bono’s stay began
(Cabins from £505, with a review of her medical
arcticbath.se). history and consultations with
experts to determine her stress
A slower way of life prime diving region of Raja A cause for celebration level. Then, embarking on a
The “Slow Life” movement Ampat, and the wildlife Chiva-Som “has had a “revelatory” daily regime
also offers welcome relief haven of Komodo island. formidable reputation, and of tailored treatments,
from the frenzy of the Boxing While on board, guests receive garnered a host of awards, massages, and fitness classes,
Day sales. It prioritises guided yoga, meditation, as a destination spa where she found that her final
“downshifting” to a slower, fitness classes, tailor- those seeking to improve their massage brought “silent
more connected way of life, made menus and daily spa physical, emotional, or spiritual tears” to her eyes as it lifted
says Francesca Syz, also in treatments. The experience well-being are guaranteed the incurable “early-morning
The Daily Telegraph. This allows guests to “focus on results without sacrificing… numbness” she had suffered
month Revivo Wellness developing a sustainable, luxury”, says Gillian de Bono with for years. Fans of
Resort in Bali took the concept healthy lifestyle while enjoying in the Financial Times. Chiva-Som who have been
to sea for the first time with its the freedom of an adventure So last month’s grand suffering withdrawal systems
six-day wellness cruise around on the warm, tropical open reopening of Thailand’s should definitely head back
Indonesia. The mobile spa water”, says Syz. refurbished Chiva-Som in for their fix.
sails routes through Indonesia’s (From £52,000 for two Hua Hin was a cause for (Seven nights from £5,595,
natural wonders, including the sharing, RevivoResorts.com). celebration among its many ChivaSom.com).

A modern classic reopens its doors

California’s Golden Door is a classic in the wellness world. But its
60 years of experience makes it no less refreshing, says Daisy
Finer in Condé Nast Traveller. “Well-being trends come and go,
but there’s a lot to be said for the vigour of collaborative wisdom
filtered through the ages and delivered with passion.” Over the
years, its 600 acres of bucolic beauty and signature ethos of
“reconnection to the inner self” have inspired cultish devotion
among its Hollywood clientele, while its 96-year old founder,
Deborah Szekely, nicknamed the “godmother of wellness”, is a
further selling point. Each stay at Golden Door is different
because guests are free to choose their own schedule. Options
range from dance and water volleyball classes to self-hypnosis for Golden Door has inspired devotion among its Hollywood clientele
sleep and spirituality. (Around $10,000 a week, GoldenDoor.com.)

moneyweek.com 28 December 2018 MoneyWeek

34 Property
This week: ideal properties for winter sun – from a private island in the Bahamas’ Exumas island chain to a conver

La Brie, Franschhoek, South Africa. This
1680s manor is home to one of South Africa’s
oldest vineyards. Set in more than 64 acres,
it has views of the Franschhoek Mountains,
and a 1-bed cottage in the grounds. 4 beds,
4 baths, receps, equestrian facilities. R95m
Knight Frank +27 (0) 21 671 9120.
Little Pipe Cay, Exumas, Bahamas. A
rarely available freehold island accessed by
boat or sea plane from Nassau with a range
of houses and cottages. 9 en-suite beds over
several properties, spa, swimming pool, sea
barn, dock frontage, staff village.
$85m Knight Frank 020-7861 1553.

Sol De Oriente, Costa

Careyes, Jalisco, Mexico. This
property is located on the most
protected coast of the Mexican
Pacific, between Puerto
Vallarta and Manzanillo, and
is surrounded by the 25,000
acre Chamela Cuixmala
Reserve. It comprises a 3-bed
main house, a 1-bed tower, and
two 1-bed bungalows perched
high above the ocean and
reached by a private funicular.
$9.9m Christie’s International
Realty +1 310 279 3311.

MoneyWeek 21 December 2018 moneyweek.com


rted 17th-century palace in Valletta, Malta, and an oceanfront estate in Paradise Cove, Vanuatu
Tamarind Beach, Paradise Cove,
Vanuatu. A five-acre oceanfront estate
on Vanuatu’s main island, a short bike
ride from the local village and minutes
from Bauerfield International Airport.
The estate comes with a 2-bed main
villa with an outdoor dining pavilion
and two 2-bedguest houses with
landscaped gardens, a thatched
gazebo, a firepit, and a helipad. POA
Christie’s International Real Estate,
+61 2 9328 1422.
moneyweek.com
Property 35
Bananaquit, Sugar
Hill Estate, Barbados.
A luxury renovated
villa in the exclusive
Sugar Hill Estate with
a 2-bed cottage with a
first-floor open-plan
living area and balcony
overlooking the pool.
The estate offers
24-hour security and
communal facilities,
including a restaurant
and clubhouse, a gym
and a tennis court.
3 en-suite bed main
house, media room,
wet bar, barbecue,
0.66 acres of landscaped
gardens. $5.25m
Altman Barbados
0808-120 2364.
The Aquila, Phuket,
Thailand. A tropical villa
in 2.5 acres of clifftop
grounds with 165 metres
of sea frontage and an
infinity pool overlooking
the Andaman Sea. It
comes with a main villa, 4
pavilions, 7 en-suite beds,
children’s bunk room, 2
receps, gym, spa, cinema,
and housekeeping staff.
$28m Savills Bangkok
+669 6196 5191 .
Palazzo Valletta, Malta.
A converted palace dating
from 1617 with views of
Malta’s Grand Harbour.
The property is set around a
central courtyard, in which
there is a large, bell-shaped
well, and the three upper levels
are connected by a limestone
staircase that leads to a roof
terrace. It has exposed stone
walls, shuttered windows,
and a stone fireplace with a
wood-burning stove. 5 beds, 4
baths, kitchen, 2 receps. £1.8m
Cluttons 020-7408 1010.
Palm Point Way, Placida,
Florida, USA. A private
waterfront house located in
Sabal Palm Point. It has a
wrap-around porch, reclaimed
wood floors, a designer
kitchen, a covered walkway
leading to the guest cottage and
a further walkway that leads to
an observation deck with views
of the Lemon Bay Estuary and
the Intracoastal Waterway.
3 beds, 3 baths, 2 receps, study,
1-bed cottage, garage, gardens,
dock. 0.82 acres. $1.28m
Michael Saunders & Company
+1 888 552 5228.
21 December 2018 MoneyWeek
36 Toys

Return to the grand old days of driving

Lotus hasn’t over-promised with its new car: it punches miles above its weight. Madeleine Taylor reports

L otus, or so goes an old joke, stands for “Lots Of Trouble,

Usually Serious”. The manufacturer is now trying to shake
off that phrase with what it calls “the ultimate road drive”.
of potholes at 40mph”. This is a car for those who think that
practicality shouldn’t come at the expense of fun.
Starting at £85,600, it’s a vehicle that “punches so far above
Surprisingly, it hasn’t over-promised. Taut, its weight you can’t believe Lotus charges
lightweight and ultra-stylish, it will make “The ultra-stylish new Lotus so little for it”, says Stuart Gallagher in
you “misty-eyed about the grand old days reminds you why the firm Evo. Indeed, buyers can expect rewards
of driving”. The new Lotus Exige Sport that extend well beyond surface glamour
410 reminds you why the firm made James used to make James Bond’s and speed – a survey by What Car?
Bond’s cars in its heyday. cars in its heyday” recently found that Lotus models top the
“Select any one of the six gears via the charts for Britain’s slowest-depreciating
gorgeous open-gate manual gearbox and you are a mere throttle performance cars, with the Lotus Elise retaining more of its value
squeeze away from properly serious acceleration,” says Chris than any other “affordable” sports car after four years.
Knapman in The Daily Telegraph. The Exige Sport 410 is Lotus’s
middle child, not compromising on the raw power and speed of Exige Sport 410: 3,456cc V6 petrol engine,
the hardcore Cup 430 but retaining road usability as it displaces six-speed manual gearbox, rear-wheel drive
the Sport 380. The light-bodied, bonded- Power/torque 410bhp/310lb ft
from 3,500rpm Acceleration
aluminium Exige more than satisfies the need 0-60mph in 3.3 seconds Top speed 180mph
for speed, tipping the scales at just 1,054kg (145mph roadster) Fuel economy 27.2mpg
to deliver 3.3-second 0-60 acceleration. (EU urban/combined) CO2 emissions 240g/km
Lotus hasn’t cut corners on handling, VED £1,760 first year, then £450 per year
says Top Gear, with steering and for five years, then £140 per year
brakes so immediately responsive,
they “can only be
described as voodoo”.
Driving an Exige is
first and foremost a physical
experience that engages
all your senses, says
Phil McNamara in
Car magazine. The
engine’s ferocious
roar is one that
“enthusiasts will
probably forgive...
especially in
return for the
hilarious gargle
on the overrun in
sport mode.”
And of course,
the rush of
speeding down the
motorway wouldn’t
be complete
without feeling
“the full jolting force

Wine of the week: the finest sparkling rosé of the year

2007 Billecart-Salmon,
Cuvée Elisabeth Salmon
Brut Rosé, Champagne,
France
(£140.00, Berry Bros &
Rudd tel. 0800 2802440 &
www.bbr.com).
this bottle an hour flavour that is completely baffling.
Matthew Jukes
Wine columnist after I opened it and Is this the finest sparkling rosé of
the mousse was as the year? Yes – there is nothing like
persistent and lively as 2007 Elisabeth Salmon and we
I am thrilled to announce that the it was when I popped have had to wait until the 29
new vintage of Elisabeth Salmon the cork. December to find her.
Rosé has, just this second, arrived The nose is calm, I have no doubt other stockists
in the country. controlled and will pop up in the new year, but for
With ten years spent on its lees measured, offering the most glorious sparkling wine
in the Billecart cellars in Mareuil- up demure, wild for your new year’s celebrations
sur-Aÿ, this wine matures with strawberry and make your way to Berry Bros &
metronomic grace and after an rose notes which Rudd, 63 Pall Mall, London.
unruffled decade of élevage it charm the
looks nothing short of ravishing senses.
today. Everything about this The palate
release is mesmerising. continues these
The colour is incredibly pale themes with a Matthew Jukes is a winner of the
and it glows, coral-hued, in the lightness of International Wine & Spirit
glass. The bubbles are so fine and touch but Competition’s Communicator of
prickly it is amazing. I went back to length of the Year (MatthewJukes.com).

MoneyWeek 28 December 2018 moneyweek.com


Book of the year
Fair Shot: Rethinking
Inequality and
How We Earn
Chris Hughes
Bloomsbury Publishing (£12.99)
This hasn’t been
a good year
for Facebook,
owing to several
scandals over
its sharing of
people’s data
and its role in
spreading “fake news”. But this
book by the firm’s co-founder,
Chris Hughes, is a plus point. It
offers an interesting perspective
on dealing with inequality.
Just as his own wealth
came from the good fortune
of being Mark Zuckerberg’s
room-mate, so do many of the
wealthy derive at least part of
their fortune from good luck,
notes Hughes. It’s thus only fair
that they pay a bit more in tax.
He thinks the fairest solution
to inequality would be for the
government to pay everyone
in work and earning less than
$50,000 a basic income. This
more limited version of the
universal basic income notion is
a lot more politically palatable
than the usual proposal of
giving everyone a fixed amount
with no strings attached.
Hughes also backs up his
arguments with examples of
successful schemes, such as
one run by Alaska that pays
everyone a dividend from an
investment fund set up with the
state’s oil revenues. This is a
punchy book that advances the
debate over how to address both
inequality and the longer-term
threat that automation might
create a world without work.
Film of the year
Crazy Rich Asians (12)
DVD £9.99, Blu-Ray £14.99
DVD/Blu-Ray released on 21 January 2019
Crazy Rich Asians: conspicuous consumption and strong acting
moneyweek.com
Reviews
The Lehman Trilogy: intelligent and moving
Novel of the year
Lake Success
Gary Shteyngart
Random House (£22)
There aren’t
many good
novels about
the world of
finance, but this
is an enjoyable
exception to the
rule. Hedge-
fund manager Barry Cohen
walks out on his pregnant
wife and disabled child and
goes on a bus trip around
America to find an old flame.
Meanwhile, his wife has an
affair with a neighbour, a
novelist who has carved out
a lucrative niche giving talks
about his unread books.
Shteyngart has obviously
done his research and it is very
easy to see which real-life people
and events he had in mind
when he wrote his novel.
The author has a deft comic
touch, perfectly capturing the
absurdity of financiers and their
big-money world.
Play of the year
The Lehman Trilogy
Ben Power (adapted from the
play by Stefano Massini)
Transfers to the Piccadilly
Theatre in May 2019
Several finance-related
productions caught our eye this
year, but the most compelling
was The Lehman Trilogy. Based
on Ben Power’s adaptation of
Stefano Massini’s play and
directed by Sam Mendes, the
trilogy comprises three one-
hour plays, each focusing on a
single generation of the Lehman
family. The first part deals with
the firm’s transformation from
cotton merchants to brokers,
the second explores the move
into banking, and the final part
shows how the Lehman family
lost control and the firm became
dominated by traders.
The play uses Lehman’s
evolution as a metaphor for
wider changes in America’s
economy and society. The three
actors (Simon Russell Beale,
Ben Miles and Adam Godley)
use a mixture of narration
There were several major
finance-related films out on
DVD, or in cinemas, in 2018.
Both The Post, an original
take on the process that led to
the publication of the Pentagon
Papers by The Washington
Post, and Molly’s Game, about
an unorthodox entrepreneur,
were nominated for Oscars.
Peterloo by Mike Leigh
examined the economic and
political events leading up to
the Peterloo Massacre, and
Generation Wealth, a
documentary, explored our
obsession with celebrity and
easy money. However, the best
money-related film for my
money was the hit romantic
37
and acting to tell the story,
each playing multiple roles.
This keeps the action flowing
and the strength of the acting
enables the audience to suspend
their disbelief. The decision
to have Lehman’s boardroom
on the eve of its bankruptcy as
the backdrop ensures that the
bank’s ultimate fate is always on
our minds. This is an intelligent,
moving play with a wide appeal.
TV series of the year
McMafia
DVD £14.99, Blu-Ray £17.99
With the Salisbury poisonings
finally forcing the government
to crack down on
Russian oligarchs, the
BBC series McMafia
is timely. It tells the
story of Alex Godman
(played by James
Norton), the son of
a Russian oligarch
forced to seek exile in London.
Alex is a successful hedge-fund
manager, but when his uncle
Boris tries to drag him into the
family business, Alex is forced
to pursue the crime lord who
threatens him and his family.
As well as being a rollicking
good adventure, McMafia
makes good points about the
extent to which dirty money
has corrupted governments
worldwide. Nowhere is this
clearer than in Russia, but
writers Hossein Amini and
James Watkins, who adapted
Misha Glenny’s 2008 book,
also cast a critical eye closer
to home, showing how many
criminals have made London
their base of operations.
Reviewed by
Matthew Partridge
comedy Crazy Rich Asians.
It’s based on the 2013 novel by
Kevin Kwan and tells the story
of economics professor Rachel
Chu (Constance Wu), who goes
back to Singapore with her
boyfriend Nicholas Young
(Henry Golding), only to
discover that he is the scion of
one of the wealthiest families in
the city state.
Although the main focus is
the display of conspicuous
consumption, this doesn’t
overwhelm the strong acting.
This is a Hollywood blockbuster
with a genuinely interesting
financial angle, referencing
game theory and micro-lending
along the way.
28 December 2018 MoneyWeek
38 Quiz of the year
Facebook flopped, Disney dazzled, Elon Musk picked a fight and there was a case of mistaken identity on
Wall Street. How much financial news of 2018 do you remember? Try our quiz, compiled by Madeleine Taylor
Money
1. Banksy’s Girl with Balloon
painting made headlines when
it self-destructed at Sotheby’s
auction house in London. How
much did it sell for that day?
a) £600,000 b) £1m c) £3m

2. How much money did the

UK government’s latest budget
put aside for fixing potholes?
a) £4m b) £42m c) £420m

3. ABritish diver, Vernon

Unsworth, is suing Elon Musk
for defamation after the Tesla
chief executive called him
“a paedo”? How much is he
seeking in damages?
a) £57,000 b) £75,000
c) £107,000
Banksy’s painting came with a shredder
4. An American boy named
a) $16bn b) $29bn c) $35bn 2. Which public figure’s 32- anything apart from a series
Ryan became YouTube’s
hour visit to Ireland in August of ads for Nespresso coffee
highest-earning star this year,
8. How much was Facebook reportedly cost €32m, or €1m this year, but still managed
raking in an impressive £17.3m
fined by Britain’s Information an hour? to rake in $239m thanks to
for his popular ToysReview
Commissioner’s Office for the sale of his tequila brand,
videos online. How old is he?
failing to secure its users’ 3. The world’s richest man Casamigos?
a) 7 b) 8 c) 9
personal data in the wake of the and only “hectobillionaire” –
Cambridge Analytica scandal? someone with net assets worth 7. Members of which 1990s
a) £220,000 b) £500,000 more than $100 bn – was British girl-group can expect
c) £850,000 embroiled in controversy this to earn £2.2 million each for
year owing to his company’s a six-day reunion tour next
9. Grassroots football in treatment of employees, tax summer?
Scotland not only gives the payments (or lack thereof), and
economy a direct boost, but philanthropic initiatives. Name 8. An impersonator of which
is worth millions in social him. rock legend, born in the USA,
and health benefits such as scammed a fan out of $1,600
crime reduction and improved 4. Which singer became the by claiming to need help
cardiovascular health, according world’s highest-paid dead recovering an “investment in
to a study commissioned by celebrity after his estate raked gold he made in Dubai”?
UEFA. How much in total does in $400m, mostly in sales from
the report claim the sport is his EMI Group shares? 9. Everyone was expecting
worth to Scotland? the Football Association to
©Ryan’s ToysReview

a) £590 m b) £870m 5. Out of the ten richest people sell Wembley Stadium this
c) £1.25bn in the world, which lost the year. But the owner of Fulham
Ryan is raking it in
most money ($18bn) in 2018 FC unexpectedly withdrew
People owing to his company suffering his offer of £600m. Can you
1. Which Irish rock band the worst ever one-day share name him?
5. How much is HS2’s budget collected $118m in pre-tax price dive in US stockmarket
for delivering rail lines from earnings to become the highest history? Companies
London to Birmingham and on -paid pop act in the world 1. Which company became
to Manchester and Leeds? between June 2017 and June 6. Who is the highest-paid the world’s first trillion dollar
a) £48bn b) £56bn c) £108bn 2018? actor of 2018 who didn’t star in public company in August,
when its stock price reached
6. Google was fined by $207.05?
European regulators in June
for favouring its own shopping 2. And which American tech
service in search engine results. giant briefly overtook it in
How much did it forfeit? November?
a) €1.3bn b) €2.4bn
c) €3.9bn 3. Which S&P 500 maker
of Barbie dolls paid its chief
7. Walmart made the largest executive 4,987 times the
ever e-commerce acquisition median salary of its worldwide
this year when it bought a 77% workers ($31.3 million,
share in Indian online retailer compared to $6,271)?
Flipkart. How much did it cost
©Alamy

Grassroots football in Scotland gives society a big boost

the retail giant? 4. Russian hackers are thought

MoneyWeek 28 December 2018 moneyweek.com


A B
©Getty Images
1. “The best way to teach your
kids about taxes is by eating
30% of their ice-cream.”
to have made £9.4bn from a
massive data breach last August
that affected 245,000. Which
UK company did they target?
5. Which Disney-owned film
studio broke records
this year for the
highest-grossing
opening weekend
with Avengers:
Infinity War,
raking in
$640m?
6. Which recent
American tech
start-up claims that
by analysing DNA it
can predict the intelligence of
an embryo?
7. Why was British
entrepreneur and government
scientific adviser Mike
Lynch charged with fraud
and conspiracy by the US
Department of Justice in
November?
8. Françoise Bettencourt
Meyers is now the richest
woman in the world after
inheriting a 33% share in
which cosmetics giant on her
mother’s death last year?
Markets
1. Former Nissan Motor
chairman and CEO Carlos
Ghosn (pictured above) was
arrested in November on
suspicion of underreporting
his own pay. As a result,
which Asian country’s stock
exchanges will now require
companies to disclose their
moneyweek.com
Quiz of the year
Quotes: put the words with the person who said them
2. “My mother’s idea of being
poor was going to the Ritz on a
bus.”
procedures for deciding the
salaries of their top executives? economies suffered a recession
2. Of the stocks listed in
the FTSE 100, which
performed worst this year,
dropping 43.8% over
the year to mid-
December?
3. Which
commodity
performed
worst in
2018?
4. Which Asian
currency hit an all-
time low of 70.8 against 9. The chief of which European
the dollar, depreciating by
13%?
5. The New York Stock
Exchange and Nasdaq both
closed on 5 December.
Which event did this mark?
6. Which commodity overtook London Stock Exchange Group
gold as the world’s most
valuable metal this year?
Avengers”Infinity War: record-breaking
39
C D
3. “Who could keep 59 stores 4. “Davos is where billionaires
open, besides God? I’m not tell millionaires how the middle
Father Christmas. I believe I’m a class feels.”
very fair guy.”
7. One of Africa’s biggest
Answers
in the first half of 2018 that 4A.Jamie Dimon
saw its GDP shrink by an 3C. Mike Ashley
annualised 0.7% in the second 2D. BaronessTrumpington
quarter after a 2.6% fall in the 1C. Bill Murray
first. Which country was it?
Quotes
10. David Schwimmer
8. Trulieve and Charlotte’s Web 9. Denmark’s Danske Bank
were listed on the Canadian 8. Legal cannabis
Stock Exchange this summer. 7. South Africa
In the US, MedMen and 6. Palladium
Green Thumb Industries also president George H.W. Bush
went public. Which market, 5.The funeral of former US
expected to be worth $146.4 4. Indian rupee
billion by end of 2025, do these
3. Sugar
2. British AmericanTobacco
companies all serve? 1. Japan
Markets
country’s biggest bank resigned 8. L’Oreal
after admitting up to £180bn
years before the deal.
Autonomy’s sales in the two
of cash-flow had been money- allegedly overstated
laundered? Hewlett-Packard in 2011. Lynch
Autonomy’s takeover by
10. Which former Goldman 7. The charges relate to
Sachs banker caused confusion 6. Genomic Prediction
when appointed CEO of 5. Marvel Studios
4. British Airways
as he shares his name with an 3. Mattel
actor from TV sitcom Friends?
2. Microsoft
1. Apple
Companies
9. Shahid Khan
8. Bruce Springsteen
7. The Spice Girls
6. George Clooney
5. Mark Zuckerberg
4. Michael Jackson
3. Jef f Bezos
2. Pope Francis
1. U2
People
9 c) £1.25bn
7 a) $16bn 8 b) £500,000
5 b) £56bn 6 b) €2.4 bn
3 a) £57,000 4 a) 7
©Marvel Studios
1 b) £1m 2 c) £420m
Money
28 December 2018 MoneyWeek
40 Blowing it

Going green with greenbacks

There is a small network of the super-rich investing in environmental protection
O ver the years I have
spent a lot of money
on women, wine and song,
while the rest has been
wasted. However, there is
also something satisfying
about giving back to the
wider community. So hats
off to Charles Burrell and “A billionaire is
Isabella Tree, custodians buying up land in
of Knepp Estate, West
Sussex. Eighteen years Idaho, Montana
ago the couple “took the and Wyoming to
radical decision to give
up on Knepp’s arable and protect it from
©Christopher Pledger/ The Telegrapph 2018

dairy farm to pursue an industry”

experimental process
of habitat creation”,
says Laura Battle in the
Financial Times. This
changed the landscape
“from monotonous fields The Burrells are experimenting with habitat creation
to grass plains, copses and
scrubland, harbouring a rich diversity of student he “fell in love with the American well, since the hope is that the projects
plant, insect and bird life”. West”, says Tate Williams in Inside “will create jobs, attract visitors and
Philanthropy. He is now spending his $6bn support sustainable economic growth”.
Funding national parks fortune on “securing land in Montana, This all sounds very worthy, so if Wyss
Such green largesse is unusual, says Mark Wyoming and Idaho” to “protect it from wants some light relief while he’s saving the
Wade in The Times. In the US, less than industry”. For example, he donated an planet, he might want to consider investing
10% of philanthropy is channelled undisclosed amount to the Trust for Public in a Sno-Cat. This is the latest status
towards green causes while in Britain the Land to buy and retire oil and gas leases symbol for the “savvy master of the snowy
figure is just 4%. However, there does on 24,000 acres in Wyoming. Other gifts universe”, according to Bloomberg’s Justin
seem to be “an intimate network of the include $35m to protect 310,000 acres of Ocean. A cross between a snowmobile
super-rich who invest in the environment”. former timberland in Montana. and a tank, its design “lets it float atop
This includes “men and women who have But he’s not content with merely snow and still make progress if it falls
funded national parks over vast tracts of protecting America’s wilderness. “I have into a crevasse”. This beast of a machine
the South African wilderness or intervened decided to donate $1bn over the next was originally intended for the US
to halt development in remote Patagonia”. decade to help accelerate land and ocean military or oil-drilling crews. But orders
Others “have paid out small fortunes to conservation efforts around the world, are flooding in from “land owners with
protect mountain ranges in northern Spain with the goal of protecting 30 per cent of remote chalets”prepared to pay $125,000
or to save Highland peaks and glens in the planet’s surface by 2030,” he writes in for a vehicle outfitted in “prison-uniform
northern Scotland”. The New York Times. This should ensure orange”.
One prominent billionaire using his “more of our planet is protected by the
fortune to conserve nature is entrepreneur people, for the people and for all time”.
Hansjörg Wyss. When he was a college It should also benefit human beings as

Tabloid money… Britain has reached ‘peak stuff’

l Tidings of comfort and joy should be l “I know I shouldn’t say it, but the l “I know you’re struggling to get into
winging their way on behalf of all high street’s nightmare before the festive swing because all joy has
womankind to domestic goddess Nigella Christmas affords me some degree of been sucked from your brain by
Lawson (pictured), says Vanessa Feltz in pleasure,” says Sarah Vine in the Brexit,” says Brian Reade in the Daily
the Daily Express. The TV cook has Daily Mail. “I used to think it was just Mirror. “Just remember that the
told American television companies me who resented the annual orgy people responsible for the merde-
to stop airbrushing her “sticking-out of festive spending. But it seems show are having an even more
stomach”, calling the practice the entire country is having what miserable time than you. Yes, I’ve got
“pernicious”. She’s right. The might be termed a ‘post-consumer’ the inside track on last week’s Tory
subliminal message from the moment. Some blame Brexit. party Christmas concert, which, by all
beauty and fashion industry to Others say the market is trapped in accounts, saw more blood-stained
young girls is: “Buy this product, ever-decreasing circles of price scraps than a butcher’s dog. David
wear this outfit, invest in this discounting thanks to Amazon Cameron, sadly, couldn’t make it. But
handbag/pair of boots/shampoo slashing prices. After all, the on a big screen, Skyping from his
and you too can look… gloriously excitement of bagging a genuine shepherd’s hut in Oxfordshire, the
gorgeous.” They don’t see the bargain has been almost totally former prime minister could be seen
hours of professional makeup, hair devalued by sales events such as coyly warbling: ‘While shepherds
and eyelash extensions that go into Black Friday. Then again, it could watched their hut by night / For fear it
churning out these idealised images. simply be that we have all reached got burned down / Mark Carney from
The truth is no product will help them “peak stuff”. If you asked me what I the Bank came round / And said you’ve
©Rex Features

look like that. They never did. They wanted for Christmas, the answer crashed the Pound.’ The screen was
never will. Thank you, Nigella. would be ‘nothing’“. bottled. Fights broke out. Ho, ho, ho.”

MoneyWeek 28 December 2018 moneyweek.com

 Crossword 41
Tim Moorey’s Quick Crossword No. 928 Bridge by Andrew Robson
A bottle of Taylor’s Late Bottled Vintage will
be given to the sender of the first correct Remembering Martin Hoffman
solution opened on16 January 2019. Answers to
This year, the bridge world lost one of its true greats – Holocaust
MoneyWeek’s Quick Crossword No. 928,
survivor Martin Hoffman, who died in May, aged 88. I’ve never seen
31-32 Alfred Place, London, WC1E 7DP.
a quicker bridge brain than Hoffman. For many decades he was
regarded as the finest Duplicate Pairs player in the world. Rightly so
– witness this deal. Hoffman, South, received the jack of spades lead
versus his Four Hearts. Plan the play.
Dealer South Neither-side vulnerable
AQ54
K8
854
A943
J10963 N K
432 Q6
A1073 W E QJ92
Q S J108652

872
AJ10975
K6
K7

The bidding
South West North East
1♥ 1♠ 2♣ pass
2♥ pass 4♥ end

It is very tempting to finesse dummy’s queen of spades – West’s

overcall makes him long odds to hold the king. Hoffman saw he could
always lead up to the queen of spades later. He rose with dummy’s
ace of spades and was delighted when East’s king fell. When he
Three clues are uncompleted puns voted favourites at the Edinburgh Festival.
followed with the king of hearts and a second heart, East’s queen
ACROSS DOWN appeared and now ten tricks were certain.
1 I’ve given up asking 1 Cupboard for clothes (8) However, this was Duplicate Pairs and Hoffman was hungry for
rhetorical questions. (4’1,3,5) 2 Ancient Greek dialect; space an eleventh trick. He drew trumps, crossed to the ace of clubs,
8 Deserter; rodent (3) in roof (5) returned to the king of clubs (West discarding) and then ran his
9 With ginger hair (3-6) 3 Disease for sheep and goats (7) remaining trumps.
10 Repeat; summarize (5) 4 Conned; owned (3) What could West discard on the final trump – currently holding
11 Chatterbox (6) 5 Iron; part of the media (5) ten-nine-six of spades and ace-ten of diamonds, with dummy holding
13 Combine Harvesters and 6 Mid-west US state (7) queen-five-four of spades and eight-five of diamonds? If he discarded
you have a _____ (3, 10) 7 Stir (2-2) a spade, declarer could cross to the queen of spades, exit with a
16 It’s for the birds (6) 11 Showing courage and second spade, and wait for the diamond lead from West (whom he
18 Make fun of (5) determination (5) read for the ace for his otherwise skimpy overcall).
21 Bride’s clothes, linen, etc (9) 12 One who is present at a At the table, West discarded the ten of diamonds, but declarer
23 Total (3) meeting (8) discarded a spade from dummy and led a low diamond out of his
24 I’m no fan of the new 14 Expire; emit (4, 3) hand. West won his bare ace, but declarer could win the forced spade
pound coin, but then again, 15 Lie (7) return with dummy’s queen and score his eleventh trick with the
I _____ (4, 3, 6) 17 Clueless; disorganised (2, 3) promoted king of diamonds.
19 Encore (5)
20 Irritating skin condition (4) For all Andrew’s books and flippers – including his new hardback
22 Snake-like fish (3) The Next Level – see AndrewRobson.co.uk.
Tim Moorey is author of How To Crack Cryptic Crosswords, published
by HarperCollins, and runs crossword workshops (TimMoorey.info).
Sudoku 928
Taylor’s, a family Solutions to 926
Across 1 Sultana 5 Start (trats To complete MoneyWeek’s
firm for 325 years,
reversed) 8 Artichoke 9 Con
6 1 7 9 Sudoku, fill in the squares
is dedicated to the
production of the 10 Miami (Mi + ami) 12 Latrine 8 1 in the grid so that every row
(anagram) 13 Ballet dancers and column and each of the
highest quality ports.
Late Bottled Vintage 15 Bargain (bar gain) 17 Utter 3 4 nine 3x3 squares contain all
the digits from one to nine.
is matured in wood ((n)utter) 19 Ali (hidden) 7 9 8 3 The answer to last week’s
for four to six years. 20 Carthorse (anagram)
The ageing process 23 Liszt (list, homophone) 4 2 3 7 puzzle is below.
produces a high- 24 Geysers (geezers,
quality, immediately homophone) 8 4 7 9 3 1 5 6 7 4 8 9 2
drinkable wine with 9 7 7 2 9 1 8 3 4 5 6
a long, elegant Down 1 Swarm 2 Let 3 Archive
4 Ado 5 Scent 6 Architect 5 7 6 8 4 5 2 9 3 7 1
finish; ruby red in
colour, with a hint 7 Tunnels 11 Allergies 4 6 8 2 3 5 7 1 9
of morello cherries 12 Laden 13 Bobtail 7 2 8 3
9 5 2 4 1 7 6 3 8
on the nose, and 14 Naughty 16 Ascot MoneyWeek is available to visually
cassis, plums 18 Reeks 21 Rag 22 Rue. 1 3 7 9 6 8 2 4 5
impaired readers from RNIB National
and blackberry to Talking Newspapers and Magazines 2 9 3 7 5 6 1 8 4
taste. Try it with The winner of MoneyWeek in audio or etext. 8 4 1 3 9 2 5 6 7
goat’s cheese or a Quick Crossword No. 926 is: For details, call 0303-123 9999,
chocolate fondant. Mrs Linda Pakuls of Dorset. or visit RNIB.org.uk. 5 7 6 8 4 1 9 2 3

moneyweek.com 28 December 2018 MoneyWeek

42 Last word

The upside of the downturn

Editor-in-chief:
Merryn Somerset Webb
Executive editor:
John Stepek
Editor:
Andrew Van Sickle
A nasty bear market is on its way. But we will enjoy watching the rich get walloped Markets editor: Marina Gerner
Comment editor: Stuart Watkins
Politics editor: Emily Hohler
Digital editor: Ben Judge
Investment editor: Sarah Moore
Bill Bonner Wealth editor: Chris Carter
Columnist Senior writer: Matthew Partridge
Contributors: Bill Bonner,
Ruth Jackson, Max King,
Jane Lewis, Emma Lunn,
The last leaves are falling from Matthew Lynn, David Prosser,
the trees. And the last days of Alex Rankine, Cris Sholto Heaton,
David Stevenson, Simon Wilson
December are counting down,
like the quiet moments before Art director: Kevin Cook-Fielding
Picture editor: Natasha Langan
an execution. Last week saw the Production editor: Mick Sharp
second-biggest weekly exodus from Chief sub-editor: Joanna Gibbs

US equity funds on record as the Founder and editorial director:

S&P 500 index suffered its worst Jolyon Connell
week since March. Is this one of Account director:
those rare times when the doom- Chris Watters (020-3890 3972)
Executive director:
mongers’ predictions understate David Weeks (020-3890 3866)
the approaching danger? Chief customer officer:

Troy, circa 1184 BC: “You’re
just a nervous nelly, Cassandra; the
horse is a nice parting gift. Bring it
into the city”. Russia, 1918:
“Don’t worry about it, Vasily.
It will all blow over soon. These
hotheads will soon be history”.
New York, 1929: “What? This
is a great market”. Washington,
2018: Unemployment is down.
GDP growth is
“Corporate America owes about
up. We’ve had a
tax cut. Inflation 50% more than it did ten (from their
is low. What’s to
worry about?”
years ago”
We don’t know. But since it is
the Christmas season, we look on
the bright side. If the stockmarket
keeps sliding, a lot
of problems will disappear (or
at least get upstaged in the news
ratings) – the trade war, the
search for a chief of staff at the
White House... Trump. Who
will care about any of this when
the Dow loses 10,000 points?
A serious bear market gets
people’s attention.
Who will care about Trump when the bear bites?
But keep looking on the
bright side of it. Worried about
inequality? Just let the correction
do its work. The rich will be taken
down a peg.
There’s a long way to go. By
our estimate, the rich have gained
$30trn Expansion plans are shelved.
in total
investments
in stocks,
bonds, real estate, rare artwork,
and collectibles) from the
fake money system and the
manipulation of interest rates by
the Fed. If the stockmarket gets
cut in half (which we expect), that
alone will take care of half the
problem.
Alas, it’s not just stock owners
who take a beating. Stocks
represent real firms. Companies
have owners, bankers, suppliers,
employees… and creditors. All of
©Getty Images
Abi Spooner
Publisher: Kerin O’Connor
Chief operating and financial
officer: Brett Reynolds
Chief executive officer:
them lose. For example, Corporate James Tye
America owes a record $9trn, Subscriptions &
give or take – 50% more than it Customer Services:
Tel: 0330-333 9688
did ten years ago. When stock (8:30am-7pm Monday to
prices go down, sales and profits Friday, and 10am-3pm on
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go down too. Employees are laid Email: subscriptions@
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Purchases are rescinded. Business Post: MoneyWeek
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Then the whole credit industry
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collapse immediately. Stronger direct debit), £129 in Europe
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ones call in their loans – putting
further pressure on the wobbly MoneyWeek magazine is
an unregulated product.
firms. But heck… it’s supposed Information in the
to work that way. Panics, credit magazine is for general
information only and is not
crises, and bear markets – like intended to be relied upon
maggots on dead flesh – clean up by individual readers in
making (or not making)
market economies. specific investment
And, still looking on the decisions.Appropriate
independent advice should
bright side, it will be worth it to be obtained before making
see the dumb-bell rich get what is any such decision.
MoneyWeek Ltd and its
coming to them. staff do not accept liability
for any loss suffered by

The bottom line readers as a result of any

investment decision.

5,663 The percentage
rise in the price of
liothyronine (from 16p to
£9.22 per tablet) – a drug
used to treat around
13,000 people in Britain
with an underactive
thyroid – after the maker,
Advanz Pharma (formerly
Concordia International),
sidestepped NHS rules by
“debranding” the drug in
2007. The Competition
and Markets Authority
(CMA) is investigating.
£3.9bn The cost to
contracts sectors due to circulating in the $10m The cost to Editorial queries:
Our staff are unable to
stealth price rises and secondary market Elon Musk’s respond to personal
costly exit fees, according that is fake, Boring investment queries as
MoneyWeek is not
to the CMA. according to Company of authorised to provide
whisky broker digging a individual investment
£13m The windfall that Rare Whisky 1.1-mile advice.
each rugby union club in 101. tunnel under MoneyWeek, 31-32 Alfred
the Gallagher Premiership a corner of Place, LondonWC1E 7DP
will receive after the $5,000 The Los Angeles Tel: 020-3890 4060. Email:
editor@moneyweek.com.
league sold a 27% stake to estimated using
private equity firm CVC average cost conventional MoneyWeek
Capital Partners. The of mining a tunnel- is published by
MoneyWeek Ltd.
league has urged the single bitcoin, boring MoneyWeek Ltd
13 shareholding clubs in including technology, is a subsidiary of Dennis
Premiership Rugby to overheads and says The Publishing Ltd, 31-32 Alfred
Place, London,WC1E 7DP.
spend the money on depreciation Guardian. It was
their stadiums rather costs, the unveiled last
Phone: 020-3890 3890.

consumers of the so-called
“loyalty penalty” across
the savings, broadband,
than wages, says The Financial Times week and Musk MoneyWeek and Money
Times. reports. The value Morning are registered
(pictured) hopes trade marks owned by
of a bitcoin it will revolutionise
©Getty Images

£41m The estimated

MoneyWeek Limited.
mortgages, home is currently getting around © MoneyWeek 2018
value of rare whisky around $3,200. IISSN: 1472-2062
insurance and mobile the city. • ABC, Jan –Jun 2018: 43,933

MoneyWeek 28 December 2018 moneyweek.com

 We search
widely.
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ISA and Share Plan
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