MARKETS P5 OPINION P24 PLUS

Japan is How your The underdog

finally back portfolio can shaking up tech
in fashion go nuclear PROFILE P34

MAKE IT, KEEP IT, SPEND IT 17 NOVEMBER 2023 | ISSUE 1182

Off track
Why Britain can’t
build infrastructure
Page 26

BRITAIN’S BEST-SELLING FINANCIAL MAGAZINE MONEYWEEK.COM

 17 November 2023 | Issue 1182 Britain’s best-selling financial magazine

From the editor...

Value investors market is at its widest since the
should remember dotcom bubble of 1999.
that in the short Post-referendum jitters and
term there is no instability have led to a derating,
difference between says Gergel, and recently
being early and being wrong, the narrative has taken hold
as investment strategist James that we have a worse growth
Montier of GMO told us last and inflation problem than
month. That reminded me that other big countries. Yet our
MoneyWeek was painfully early growth has actually been in
when it highlighted the value in the middle of the G7 pack since
Japan in the early 2000s. the pandemic. And inflation is
The market appeared to be easing (although core inflation

©Getty Images
embarking on another long- is uncomfortably high – see
term upswing after a roaring Japan is finally back in fashion among investors page 13). Nor is political risk
2005, but the momentum much of a problem now, given
ebbed, and even the advent of “In the short term there is no difference the minimal differences between
Abenomics and the attendant Tory and Labour policies. So
corporate reforms failed to
between being early and being wrong” global investors’ perception may
trigger a structural upswing in the 2010s. another case of “early and wrong”. We change before too long.
Now, however, those changes, along with have been trumpeting it for years, but it Even if this is not the case, we are being
global investors’ growing confidence that remains stubbornly out of fashion – indeed, paid to wait: the FTSE 100’s dividend
deflation may have been permanently the Bank of America survey reveals that yield is 4%, while there are always eye-
vanquished, have underpinned a strong UK equities are almost as unpopular with catching bargains for stockpickers to
rally in the past three years. global fund managers as they were at the investigate; David J. Stevenson highlights
time of the mini-Budget disaster last year. the potential in our manufacturing sector
Coming in from the cold Short of flying in Warren Buffett, what on page 28. Max reminds us of the appeal
Japan is finally back in fashion among could prove a catalyst for a rerating here? of infrastructure trusts, whose yields help
fund managers after 30 years. Bank of The value in the market, always a pre- make up for their unpopularity (see page
America’s latest monthly survey of global requisite for healthy long-term returns, is 22). Add some ideas from Merryn on
fund managers shows they have not been beyond doubt. British stocks are unusually the energy crisis (see page 24) and some
this overweight in US and Japanese equities cheap while other markets are expensive. international diversification, and we have
relative to eurozone and British ones since On Citywire this week Simon Gergel, plenty of potential to add to our portfolios
2008. Interestingly, it seems to have been manager of The Merchants Trust, and make up for the fact that the British
the seal of approval by Warren Buffett (see highlights an analysis by Goldman Sachs market lacks a catalyst for a rebound. The
page 5) that sparked the upswing, even showing the UK is at the bottom of its 20- long term, remember, is simply a series of
though the appeal of corporate Japan was year range on ten times earnings. The US is short terms.
clear before then. at the top of its long-term valuation range
That brings us to the British at 20 times. What’s more, the gap between Andrew Van Sickle
stockmarket, which is starting to look like value and growth stocks within the British editor@moneyweek.com

Good week for:

Swifties rise up Fresh from finishing the first leg of her Las Vegas residency, singer
Fans of US pop star Adele has registered a new firm with Companies House called The
Taylor Swift Shelbourne Collective, says the Daily Mirror. The singer, whose net
(pictured), known as worth is £165m, according to The Sunday Times Rich List in May,
Swifties, are plans to sell her own range of cosmetics so that fans can “perfectly
rallying against recreate her famously smokey eyes”.
Javier Milei, “a
hard-right Sales of British TV programmes to overseas broadcasters and
candidate with a streaming platforms rose by 22% to almost £1.9bn last year, says the
rock star image” in Daily Mail. Streamers accounted for more than half of sales for the
the run-off to become first time, compared with 39% a year earlier. BBC wildlife
Argentina’s next documentaries Frozen Planet II and Serengeti, along with ITV’s drama
president, says series The Ipcress File were among the most exported programmes.
Harriet Barber in The Sunday Times. They accuse
Milei of planning to revoke access to abortion, Bad week for:
Cover illustration: Howard McWilliam. Photos: Getty Images

shut the ministry for women and loosen gun laws.
Fans put up posters reading “Swiftie no vota
Milei” outside the Estadio Mâs Monumental, the
stadium in the capital where Swift was playing
earlier this month. And while the singer has not
personally commented on the election, the
Buenos Aires legislature voted to name her as a
guest of honour last week. Only officials from
Milei’s Freedom Advances party voted against the
©Getty Images; Shutterstock
Conservative peer Michelle Mone (pictured) has admitted to The
Guardian her involvement as a “liaison“ in PPE Medpro, a company
that was awarded government contracts worth £200m for personal
protective equipment during the pandemic via a “priority fast lane”.
She had previously used lawyers to deny any connection, says the
paper. A spokesman for the company confirmed that her husband
had been “the chairman and leader of the PPE Medpro consortium”.

measure. Milei, a relative outsider, had galvanised
support, particularly among young men, to finish
in second place after the first round of voting.
Swifties can express “what they want”, Milei said.
Former NatWest boss Alison Rose has lost £7.6m in exit pay, made up
of bonuses and shares, over her role in the Nigel Farage debanking
scandal, says The Telegraph. The bank, of which the taxpayer owns
40%, confirmed that Rose would not be granted “good leaver” status
after she discussed Farage’s banking details with a journalist.

moneyweek.com 17 November 2023

4 Markets

Commodities fall back to earth

Alex Rankine
Markets editor

It has been three years since Pfizer and

BioNTech announced they had developed a
vaccine for Covid, sending global markets
soaring, says Russ Mould of AJ Bell. Since
then, the pair have received “precious little
gratitude” from investors, with their shares
“languishing”.
Instead commodities have been the big
winners in the three years since “Pfizer
Monday”. The S&P GSCI index, which
tracks 24 major raw materials, has climbed
by 66% since the start of November 2020,
compared with a 37% gain over the same
period for America’s S&P 500 stock index,
and big losses for bonds (see below).
Commodities and equities take turns

as market leaders, notes Mould. The
Bloomberg Commodity index outran the
FTSE All-World benchmark in the 2000s,
but then lagged stocks in the 2010s. So
far, “raw materials look to have started a
fightback in the 2020s.”
Irrational exuberance ebbs
Many commodity gains came in the first
half of 2022, when raw material prices leapt
following Russia’s invasion of Ukraine.
Between them, the two countries accounted
for about 30% of pre-war global wheat
exports, notes Simon Constable in The
Wall Street Journal. That propelled world
food prices soaring to record levels. Yet the
commodity boom has since cooled: wheat
has fallen from a peak of $12.25 a bushel
last year to $5.61 recently.
Overall, the S&P GSCI index is off 4%
since the start of the year. The sell-off has
been particularly acute in battery metals
such as lithium and nickel, down almost
70% and 40% respectively so far this
Copper prices have slipped by 3% in 2023
year, says Harry Dempsey in the Financial
Times. The decline has been driven by
the “irrational exuberance of 2021-2022
reversing, rather than some kind of massive
doom and gloom setting in”, says Benjamin
Hoff of Société Générale. Chinese electric-
vehicle sales rose by 25% in the first nine
months of this year, but that was interpreted
as a huge disappointment compared with a
doubling in the same period last year.
The sell-off in other industrial metals
has been surprisingly small – copper and
aluminium have slipped by just 3% in 2023
– given the scale of stress in China’s crucial
property market, says Reshma Kapadia
in Barron’s. The energy transition, which
requires vast amounts of copper wiring,
seems to be putting a floor under prices.
When, back in 2015, global industrial
demand last faltered by a similar amount
to this year, copper prices plunged by
©Getty Images
almost a quarter, says The Economist.
Copper is nicknamed “Dr Copper” for its
ability to take the temperature of the world
economy, but resilient structural demand
from the energy transition means it may be
time for it to “hang up [the] stethoscope”.
Data provider S&P Global estimates that
worldwide demand for refined copper will
almost double by 2035. An electric car
contains almost twice as much copper as a
conventional vehicle.
For all the grand talk about scarce
battery metals and geopolitical
fragmentation, this year has left
commodities traders “struggling to eke
out profits from sluggish metals markets”
after investors got carried away in 2021 and
2022, says Bloomberg. As Mark Hansen of
Concord Resources puts it, “it’s dawning
on people they’ve talked themselves into a
supercycle that isn’t happening”.

Is the bond bear market drawing to a close?

“All the worst things about the cautious investors are
1970s seem to be coming demanding a steeper price to
back,” says Toby Nangle in the lend to governments.
Financial Times. “Inflation. The monster post-
Strikes... silly flared trousers” pandemic bond sell-off may
and steep losses in bond be drawing to a close, says
markets. Indeed, at first glance Tom Stevenson in The
the 15% slide that holders of Telegraph. Interest rates
the benchmark US ten-year across developed countries
government bond suffered at look close to the peak, as
the end of that decade looks suggested by this week’s
like small-fry compared to a cooler inflation figures. If next
recent bond slump of 23%. year brings lower interest
©Getty Images

Yet in real-terms the 1970s rates, then some of the

still look worse – persistently
high inflation over many years
ate deeply into the real
purchasing power of fixed-
income investors. Today’s
bondholders have so far got
off comparatively lightly.
Bond yields move inversely
to bond prices. The recent
yield spike has been one for
All the worst features of the 1970s are coming back
the ages. In April 2020, the US
ten-year Treasury yielded
0.66%. By October 2023 it had
risen to 4.9%. Rising interest
rates have raised the price of
money. That hits borrowers,
especially the economy’s
largest borrower – the state.
Concern is also growing about
government debt loads. As The
Economist notes, “America’s
fiscal deficit... will clock in at
almost 6% of GDP for the fiscal
year of 2022-2023”. That
money will need to be raised
on bond markets, where
pressure on government
bonds should start to abate.
Before then, investors
should consider locking in
“higher income than has been
possible for at least 15 years”,
while also looking forward to
potential capital gains on
bonds “as and when interest
rates start to come down”.

17 November 2023 moneyweek.com


Energy-price
squeeze subsides
The “risk premium” bolstering
oil prices after Hamas attacked
Israel on 7 October appears to
be dissipating, says Edward
Gardner of Capital Economics.
Brent crude prices topped $90 a
barrel in the wake of last month’s
attack, but have since fallen to
around $83 a barrel. They fell by
5% last week as weak credit
demand in America and
sluggish exports from China
and Germany implied a weak
outlook for global demand. Still,
the oil market remains fairly
tight and further price drops
could push oil producers’ cartel
Opec+ into another round of
supply cuts. We thus forecast
that Brent will end “both this
year and next year at $85 per
barrel”, says Gardner.
European natural gas
prices are similarly quiescent.
“Unusually mild weather”
and virtually full natural-gas
storage in Germany, France and
Italy have seen prices land at
€47 per megawatt-hour, says
Trading Economics. That is
more than 60% lower than this
time last year, when the
continent faced fears of a winter
energy shortage. At 118p per
therm, UK natural gas futures
have seen a similar fall over the
past year. Fast-tracked
construction of liquefied natural
gas (LNG) import infrastructure
and reduced energy usage have
helped the EU succeed “[in
breaking] its dependence on
Russia’s natural gas”, says
Anna Cooban for CNN. Still,
prices have still been running at
“almost double their historical
average” of late, while energy
markets remain “jittery”.
Viewpoint
“[Share] buyback activity in the UK
market is close to record levels...
Buyback programmes... this year
have already reached £46.6bn [and]
the total for the year is likely to
come close to last year’s record of
£58.2bn... The practice of reducing
a company’s share capital by buying
the stock [to raise the share price]...
has always divided investment
opinion... On the plus side, [buybacks]
are... more tax efficient than dividends
[and] much easier to cancel without
anyone really noticing... [But] buyback
activity tends to be at its greatest
when share prices are at their peak,
not... when prices are down in the
dumps... As often as not, companies
waste capital by overpaying for their
shares, disadvantaging the shareholders
left behind. Management confidence
that the shares are cheaper than they
should be is frequently misplaced.”
Jeremy Warner, The Telegraph
moneyweek.com
Markets
The hidden value in Japan
After “30 years of false dawns”,
Japan is finally back in fashion
among global fund managers,
says Leo Lewis in the Financial
Times. Thank Warren Buffett.
In late 2019 Tokyo’s stocks were
in the doldrums; global investors
had sold “an unprecedented
$132bn” in local equities over
the preceding 32 months.
Then in mid-2020 Buffett’s
Berkshire Hathaway investment
company disclosed that it had
built stakes in five local “trading
houses” (stocks that offer
©Alamy
broad exposure to the Japanese
economy). That sent the local
Topix index soaring 43% over
the next three years.
Tokyo’s moment
International investors bought a
net $30.7bn of local stocks this
year to 27 October, note John
Cheng and Ishika Mookerjee
on Bloomberg. The Topix index
has soared by a quarter in 2023
and is on course for its best year
in a decade. Yet “headwinds”
may be gathering as global
growth slumps, a particular
challenge for Japan’s export-
focused economy. As Japan’s
central bank gradually tightens
monetary policy, the “era of
yen weakness that has bolstered
exporters’ earnings” and
powered the stock rally might be
drawing to a close.
Japan’s strong performance
this year is “almost entirely due to
the weakness of the yen” rather
than better fundamentals, say
Thomas Mathews and Gabriel
n The age of the hermit
Household spending on services
Percentage of total consumption,
OECD countries
64%
62%
60%
58%
2005 2010
5
A vote of confidence from
Warren Buffett has given
Japanese stocks a boost
Ng of Capital Economics. In more liberally than in the 1980s.”
dollar terms, the MSCI Japan The recent rise in domestic
index has performed similarly to inflation has also helped by
the average for other developed allowing firms to raise prices.
markets this year. Loose Despite these “widening profit
monetary policy – Japanese margins”, the market remains
interest rates are -0.1% – does cheap. On an enterprise value/
provide a boost to the domestic earnings before interest, taxes,
economy and stocks that is not depreciation and amortisation
occurring elsewhere. But with basis, US shares trade on “13.5
inflation picking up and wage times versus Japan’s 5.25 times”.
growth still modest, “we expect And the weak yen means that
growth to falter [and] Japan’s foreign currency goes further in
stockmarket to underperform the local market.
that of the US... over the next “We are now seeing
couple of years”. extraordinary value in Japanese
“Since 1998, corporate equities that has long been
Japan has been saving around hidden,” says Steven Chambers
6.5% of GDP a year,” says of Hosking Partners. Japan’s
Peter Warburton in the Halkin “once reluctant” corporate
Letter. There has been growing managers are now being forced
regulatory pressure on firms to engage with those calling
to redirect those vast cash piles for greater “capital efficiency”
to shareholders. “Corporate and returns to shareholders.
Japan has become impressively This marks a “historically
profitable over the past decade – significant turning point for
and has distributed profits much Japan’s capital market”.
Before Covid, consumers in the
OECD, a club of developed
economies, were spending an
increasingly large share of their
incomes on services: the likes of
hotel stays, healthcare and
financial planning, says The
Economist. But lockdowns
forced the closure of pubs and
hotels, and prompted a surge in
demand for goods such as
laptops and exercise gear.
There has been a lasting
impact. Consumers are still
spending $600bn a year less on
services than you would have
expected given the pre-Covid
trend. They spend more time at
home and splash out on
furnishings, clothes and new
Source: OECD / The Economist
hobbies like cooking. Tellingly,
the trend is less noticeable in
countries that spent less time in
lockdown. “Welcome to the age
of the hermit.”
2015 2020 2023
17 November 2023
6 Shares

SoftBank’s blurred Vision M&S goes from

frumpy to fabulous
Marks & Spencer’s shares
The Japanese investment group’s technology funds have struggled, not jumped by 9% on the news it
least because of an investment in WeWork. Matthew Partridge reports is to pay a dividend for the
first time since before Covid,
Shares in Japan’s investment company SoftBank say Oliver Ralph and Euan
Group slid by almost a tenth last week as it “sank Healy in the Financial Times.
deeper into the red” in the third quarter, says The move comes as “bumper
Megumi Fujikawa in The Wall Street Journal. Its food sales” helped bring
technology investments “struggled”. The Vision about a first-half result that
exceeded expectations. Pre-
Fund 1 made a small profit of £2.4bn. tax profits hit £326m in the
However, this was outweighed by losses from six months to 30 September,
other Vision Fund vehicles and $1.6bn in losses up by an annual 56%.
related to its stake in and financial support for The firm says its success
WeWork, one of its most high-profile investments, was due to “favourable
which has just filed for bankruptcy. The Vision market conditions” and
Funds investment unit posted a $1.7bn loss, with competitors’ exits from the
SoftBank as a whole losing $6.2bn. market. The shares have
The loss on WeWork shouldn’t “have been a risen by 90% since January,
enabling it to rejoin the
surprise” given that the office-rental company’s FTSE 100 index and making
problems have already been well documented for it the blue-chip index’s
many years now, says Breakingviews. What did second-best performer after
raise eyebrows was the fact that SoftBank made Rolls-Royce.
an overall loss, when analysts had pencilled in a Both the food and the
©Getty Images

$1.2bn profit. Investors are sceptical of SoftBank’s chief clothing arms “look in their
As a result, it is “little wonder” that many financial officer Yoshimitsu Goto’s claims best shape for years”, says
investors will still be “contemplating the abyss” Alistair Osborne in the
and inclined to ignore SoftBank’s chief financial better if [SoftBank] was going to cash in on its Times. Food, which has
always done well, has been
officer Yoshimitsu Goto’s insistence that the most lucrative investment”. Beijing’s crackdown bolstered by “upgrades to
Vision Funds have “hit the bottom”. on tech has wiped 72% off Alibaba’s shares from 500 products”, as well as “a
the 2020 peak. £30m spend on lowering
An opaque unlisted portfolio And the sales “remove a safety net” that prices across 200 products
Goto argues that if you strip out “a host of reassured SoftBank’s shareholders – selling and locking them in on
expenses”, its Vision funds actually made a some of Alibaba’s shares ensured that SoftBank 150 more”.
small profit, says Min Jeong Lee on Bloomberg. produced a profit in the third quarter of 2022. This has been rewarded
He also claims that “there is more than $29bn Investors will now be hoping that SoftBank’s with market-share gains,
of assets in [the] portfolio that SoftBank may founder and CEO Masayoshi Son is “hunting out mainly from a “lacklustre
Waitrose”, and an 11.7% rise
be able to cash in soon”, citing, among others, a safety net to replace Alibaba”. in underlying sales. Like-for-
TikTok parent ByteDance. Nonetheless, Nevertheless, despite the WeWork disaster like sales across the clothing
investors are extremely sceptical about this and the sale of Alibaba, Son is unlikely to stop section rose by 5.5%, while
given that there is “little visibility into the “making billion-dollar bets on technology operating margins jumped
performance of the majority of the Vision Fund’s companies”, any time soon, says Max Kendix from 9.8% to 12.1%, with
unlisted portfolio companies”. in The Times. While pledging to “study what M&S also benefiting from
There is some good news, however, says Lex went wrong and try to do better with its future recent efforts “to wean the
in the Financial Times. SoftBank has reduced its venture capital investments”, Yoshimitsu Goto group off promotions”.
exposure to geopolitical risk by selling most of confirmed that SoftBank has been “carefully M&S is now seen as “the
UK’s best retailer” for
its stake in Chinese tech giant Alibaba over the restarting” investment, “focusing in particular on women’s clothes, says Ellie
past two years. Still, “the timing could have been artificial intelligence”. Violet Bramley in The
Guardian. Once M&S clothes

Robinhood misses its target

Last week shares in online
broker Robinhood fell by
15% after it reported a
decline in trading volumes,
says Tanaya Macheel on
CNBC. Although overall third-
quarter revenue rose by 29% to
$467m, it failed to reach the
$480m analysts had expected,
while transaction-based
revenue fell by 11%. There was
a 13% drop in third-quarter
transaction revenue related to
equity trading, while crypto
trading dropped by 55% year
on year.
Robinhood has said that it
hopes that new “industry-
leading products” will help it
find new sources of revenue,
while it will also soon launch its
brokerage in the UK and allow
were seen as either
“frumpy” or “at best
inoffensive”. But now it is
EU customers to trade crypto. to try harder to “reinvent itself appealing to female
It’s hard to deny that some of by branching out into new customers “who have one
Robinhood’s new ideas are products such as retirement eye on Vogue and another
starting to show promise, accounts”, says Lex in the on value”.
says Telis Demos in the Wall Financial Times. Not only have Much of the credit is
Street Journal. For example, it its shares fallen by 80% since down to the director of
has recently persuaded 100,000 hitting a high in 2021, but it womenswear, Maddy Evans,
customers in the last three also seems to be “losing its who has “helped the brand
months to sign up to cachet among young traders”, to develop a better
Robinhood Gold, which with fewer of its customers understanding of who
gives users benefits such as actively trading. their shoppers are”, so it
research and higher interest This is especially galling, can fill a gap between
rates on cash balances in return since rivals E*Trade and “fashion-forward but
for $5 a month. Charles Schwab recently pricey” retailers and those
Robinhood’s management managed to add 300,000 and “associated with clothing
wants most of its users to be 650,000 new active customers less likely to last”. Moreover,
Gold payers eventually. But for respectively. Still, moving into M&S has had success in
now this is still not enough to pensions is a big risk, given that third-party brand
compensate for the end of the its success in this area will partnerships, which bring in
trading frenzy that broke out depend on it winning “a wider demographic”, and
during Covid. It’s clear that it customers from “established has also improved an
makes sense for Robinhood brands” such as Fidelity. “antiquated supply chain”.

17 November 2023 moneyweek.com

8 Shares

MoneyWeek’s comprehensive guide to this week’s share tips

Five to buy
BT Group
Investors’ Chronicle
Burnt in recent years by higher
commodity prices, which raised
the cost of laying new fibre-
optic cable, BT is now profiting
from inflation-linked price
rises in contracts, allowing it
to “squeeze more profit” out
of customers. The Openreach
network added a record
860,000 premises last quarter,
although that hasn’t stopped
BT customers from switching
to rivals where they are offering
full-fibre broadband ahead of
BT. Still, costs are falling and
Openreach is turning into a cash
cow. Buy the shares for the 7%
forward dividend yield. 120p
Eni
The Telegraph
Even by the standards of the
lowly rated oil and gas sector,
shares in this Italian energy
giant are inexpensive. On 6.6
...and the rest
The Mail on Sunday
A post-Covid slump in online
shopping has left marketing-
software specialist Dotdigital
Group in the doldrums. But
its recent trading performance
bodes well. Management spends
“consistently” on research and
development (R&D) to stay
ahead of rivals. The opportunity
as advertising spending shifts
online is clear, and the shares
now look good value (88p).
Shares
London-listed biotech
venture fund RTW Biotech
times expected profits over
the next year, the firm is
cheaper than its eight big rivals.
Eni’s shares have delivered
a 200% total return in three
years and the most recent
results beat expectations. The
stock also offers a 6.2% forecast
yield. €15.37
PayPal
Shares
The global leader in digital
payments is suffering a severe
post-pandemic hangover.
Lockdowns saw the shares
leap to 70 times earnings as
housebound customers turned
to internet shopping. But the
shares have since crashed as
reopening has lowered sales
and margins. Yet recently
operating margins have ticked
up as management cuts into a
“bloated cost base”. On a 2024
price/earnings(p/e) ratio of just
9.7 the shares are too cheap for a
leading technology name with a
globally trusted brand. $56.42
PPHE Hotel Group
The Sunday Times
Shares in some hotel chains
have roared amid the post-
pandemic travel boom, but the
owner of the Park Plaza and
Arena brands, among others,
Opportunities has announced
an all-share merger with Arix
Bioscience, another industry
investor, pending shareholders’
approval. The pair have
“complementary” portfolios
and the combination provides
has been left behind. The shares
have lost a third in five years as
inflation has dented profits and
£700m of debt has undermined
investors’ confidence. But that
should be set against a property
portfolio including “prime sites
in big European cities”. Recent
trading performance has been
encouraging and the board
has announced a 16p interim
dividend. Consider “booking a
stay”. 1,040p
Target Healthcare Reit
The Mail on Sunday
Almost 75% of the 450,000
One to sell
Tesla
The Motley Fool
HSBC suggests that
investors “reduce”
their holdings in
Tesla, citing the
substantial capital
costs of the electric-
car pioneer’s
speculative bets on
supercomputers,
robotaxis and
“humanoid robots”.
In the core electric-vehicle
operation, a goal of 20 million
deliveries by 2030 may prove
out of reach. There is also major
diversification – a key benefit
in a risky sector. The increased
scale should also attract more
institutional interest in the
shares. Keep buying ($1.11).
The Telegraph
Oil giant BP has flip-flopped
in recent years, announcing a
dramatic shift to renewables in
2020, only to backtrack when
investors objected. It is also
without a permanent CEO
following the sudden recent exit
of Bernard Looney. Yet on just
seven times forecast earnings,
many of the risks are in the
older people in UK care homes
“are forced to share shower
and bath facilities with fellow
residents”, while “many do not
even have their own lavatory”.
Residents at Target-built homes,
which number just under 100,
have purpose-built facilities and
ensuite wet-rooms. The homes
are rented out to specialist
providers, with regular checks
to ensure quality of care. A
sell-off in property stocks has
seen the shares lose 40% in
18 months, but on a forecast
dividend yield of over 7% they
seem “a bargain”. 78p
“key man” risk
in a firm that
remains at the
whim of CEO
Elon Musk. Tesla
does enjoy some
big advantages
over its rivals, but
on a valuation
exceeding that of
Toyota, Ferrari,
Stellantis, Honda,
Ford and GM
combined, there is little margin
for error and regulatory hurdles
await some of Musk’s most
ambitious projects. Avoid. $215
price. Hydrocarbons will stay
highly cash-generative for years
to come. Buy (481p).
The Times
A crisis may have been averted
at Metro Bank but investors
have been “painfully diluted”
by last month’s emergency
cash injection. The shares have
fallen by 67% this year, and the
rescue does not solve Metro’s
long-term problem: its model as
a branch-based challenger bank
“looks increasingly outdated”
in a world where banking is
moving online. Avoid (44p).

An American view IPO watch

Copart is “an under-the-radar growth story”, says Barron’s. The
world’s top auctioneer of salvaged vehicles – ranging from crashed
cars with usable parts to vehicles that are uneconomical to fix but
still serviceable – has almost tripled earnings per share in five
years and is set to expand them by another 14% in the year to 31
July 2024. The firm is part of a duopoly in the market and resistant
to recessions as accidents occur in relation to the number of miles
driven. The market is also enjoying structural growth as vehicles
India’s initial public offering (IPO) market is experiencing a
boom, says The Economist – 194 companies had listed by the
beginning of November 2023, compared with 144 for all of 2022.
And while investors have hitherto typically flocked towards
“sprawling conglomerates run by the country’s tycoons or...
buzzy” technology companies, this year they have grown
impatient with “anaemic” or non-existent profits at these firms.
Now they are scooping up “ordinary” companies benefiting
©Alamy; BT; Tesla

are getting older and the increased use of technology in cars from “extraordinary” GDP growth. Recent successful listings
makes even simple repairs costlier. Copart has invested in have included Mankind Pharma, a maker of pregnancy tests and
technology to ensure it leads the field in online auctions. condoms, and pen maker Flair Writing Industries.

17 November 2023 moneyweek.com

10 Politics & economics

Dawn of
the dead
Rishi Sunak has resurrected
a former prime minister.
Emily Hohler reports
“This week Rishi Sunak is mainly defying
the Tory right,” says Robert Shrimsley in
the Financial Times. His “recent political
strategies have had the lifespan of a mayfly

but, with his latest reshuffle” he appears to
have concluded there is “no point trying to
appease unbiddable hardliners who never
wanted him there in the first place”.
By firing home secretary Suella
Braverman, replacing her with the “affable”
James Cleverly and bringing back David
Cameron as foreign secretary, Sunak has
ensured the top three jobs are “in the hands
of centre-right pragmatists” – even if the
“older all-male line-up” hardly bolsters his
claim to be a change candidate ending 30
years of failed Tory orthodoxy.
Continuing the bully-boy pattern of
“chucking women with strong views and
Conservative principles – Priti, Liz and
now Suella – overboard”, the “chapocracy
is firmly in control again”, says Allison
Pearson in The Telegraph. Braverman’s
letter to Sunak is a “devastating” epistolary
verdict on his premiership.
As she was a darling of the right, Sunak
needed her support to “get him over the
line into Number 10” in October 2022. He
therefore agreed to a number of conditions
which included reducing legal migration
by increasing salary thresholds on work
visas, and reforming the international
students route. She also asked for a
“notwithstanding clause” to be put into
the legislation that would exclude the
operation of international law when it came
to “stopping the boats”. Her letter paints
a picture of a “vacillating man” who has
reneged on promises to the British people
and who is unable to show leadership in
the face of the “extremism shown on our
streets” since Hamas’s attack on Israel.
A ploy to avoid catastrophe
“Her departure – and the combustive
manner of it – deepen the perception
that the Tories are now merely the party
of chaos” and adds to the idea that
Sunak’s administration is weak, agrees
Madeleine Grant, also in The Telegraph.
Nevertheless, Braverman was not popular.
Her language (she spoke of a “hurricane”
of mass migration, described homelessness
as a “lifestyle choice” and branded pro-
Palestinian protests “hate marches”)
“alienated” many centrist Tories, while
those further to the right “lamented” her
failure to achieve “concrete results”.
But Cameron’s appointment – he is not
an MP – is hardly an “endorsement” of the
349 MPs sitting on Sunak’s backbenches
and “may even have added to the sense of
despair”. Cameron has his strengths – he cut
taxes and was tough on welfare and other
spending – but he has “accrued” baggage,
“from the Greensill debacle to his naive
rapprochement with China”.
©Getty Images
Cameron: the Chapocracy is back in control
On the plus side, Cameron has
“experience in diplomacy and security
matters that no candidate in the cabinet
match”, says Rafael Behr in The Guardian.
But Sunak is essentially “borrowing
political capital from the Tory past” in a
desperate bid to “stop the slide into electoral
insolvency”. His “biggest task” isn’t to win
the next general election but to get a party
that is “averaging a quarter of the vote
in polls” back up to a level that avoids a
“cataclysmic defeat”. In that context, giving
a “bit of love to what was once the party’s
reliable core is not a bad move”.
It’s not, agrees William Hague in
The Times. Ultimately, politics is “not
transformed by moving ministers”, but “for
the next election to be competitive, there
are four requirements”. Voters need to have
“strong doubts” about how Labour would
govern; have “rising confidence in their
economic situation” (next week’s Autumn
Statement will be key); know that their
government is led by “serious” people who
“make a strong team”; and lastly, feel that
at a time of “deepening division around
the globe, Britain is a voice for stability,
reflection and reason. On the last two of
these four requirements, this just became a
significantly stronger government.”

Will there be a ceasefire in Gaza?

The Israeli military “forged
ahead” with its raid on Gaza’s
largest hospital on Wednesday,
a step that is “expected to
shape the pace and extent of its
war with Hamas”, says The New
York Times.
Israel says that Hamas has
built a military command centre
underneath the Al-Shifa
hospital and is holding hostages
there, a claim corroborated by
US intelligence, but which
Hamas and the hospital deny.
For “Israel’s critics”, the
focus on the hospital, where
thousands of civilians have
taken shelter alongside
seriously ill patients, pregnant
women and premature babies,
©Getty Images
life”. Israeli strikes on Gaza
since 7 October have killed more
than 11,000 people including
more than 4,600 children,
according to Gaza health
officials. The results of the raid
“could determine the extent
of international support for
Israel’s invasion”.
International horror at the
intensifying fighting has led to
increased calls for a “ceasefire”
or “humanitarian pause” to
allow vital aid supplies to reach
Gaza, says The Economist. The
US will only support pauses, as
will the G7 group of rich
countries, but the UN has
backed a ceasefire.
Some, including the British
few days to allow aid to get
through and for Hamas to
release hostages. However,
“Israel fears that such longer
pauses could, under enormous
international pressure, become
a de facto ceasefire”.
Sir Keir Starmer, who backs
“longer humanitarian pauses”,
has come under increasing
pressure to change his position
after three senior Labour figures
broke ranks last Friday and
called for a ceasefire, says the
Daily Mail.
Labour frontbenchers have
been warned that if they vote
for a separate amendment from
the Scottish National Party on
Wednesday backing a ceasefire,

“embodies what they see as government on 14 November, they would have to resign or
Starmer: under pressure
Israel’s disregard for Palestinian are proposing breaks of a face the sack.

17 November 2023 moneyweek.com

 Politics & economics 11

Will chinwag cool tensions? Betting on politics

Having focused on
Britain and the US
The US and Chinese leaders seek a rebalancing. Matthew Partridge reports over the past few
weeks, it’s time to
After months of “playing each other again”, amid shift this column’s
hard to get”, Chinese “sky-high tensions”, is attention to Australian
leader Xi Jinping finally a genuine achievement. politics. One active
agreed to meet with US The “behind-the-scenes market that looks
president Joe Biden, say conversations” between interesting is the result
of the next federal
Nicola Smith and Tony diplomats at the meeting election. With £22,627
Diver in The Telegraph. will also “form the matched on Betfair,
Relations between the linchpin of US-China Labor is currently strong
two countries had been engagement in 2024” favourite to win
“virtually frozen” since – Biden is unlikely to re-election (as defined
February, when the US speak to the Chinese by providing the prime
shot down a Chinese spy president directly in an minister) at 1.69 (59.9%),
balloon. Both leaders election year. compared with 2.36
sent out signals that (42.3%) for the Liberal-
National Coalition.
they wanted to “work War or peace? Given that the
towards rebalancing their China and the US may election can take place

©Getty Images
fragile” relationship. be at loggerheads over as late as May 2025,
Biden sought progress Xi and Biden: the start of a thaw? Taiwan, but a deal which is 18 months
on reopening military- announced this week away, betting on this
to-military ties, a ban on the use of artificial between the country’s two largest opposition may seem a tad
intelligence in autonomous weaponry and co- parties has “major ramifications” for its future premature. Still, the
operation to end fentanyl trafficking. The meeting as well as for US-China relations, says Joyu polls show that Labor’s
began as MoneyWeek was going to press. Wang in The Wall Street Journal. Taiwan’s main lead over the Coalition,
when you take second
opposition Nationalist Party, “which favours preferences into
It’s good to talk closer relations with Beijing”, has agreed to work account, has been
The big elephant in the room was “the future of the with a third party, founded by a former Taipei narrowing since the
self-governing democratic island of Taiwan, east mayor, to run jointly for the 2024 elections. This summer. So while it was
Asia’s most dangerous potential flashpoint”, says “long-anticipated deal” is expected to bolster the around ten points as late
Richard Lloyd Parry in The Times. Beijing believes opposition’s chances against current vice-president as July, it is now very
the “unity” of Taiwan and the mainland is a “core Lai Ching-te, who wants “tighter ties with the US” small, with several polls
interest”. For its part, the US strongly “opposes any and is currently leading in the polls. putting the gap between
use of force in changing Taiwan’s political status”. Beijing has denounced Lai as a “separatist” the two parties as small
as just 2%.
Biden in fact has gone further than any other and framed the presidential race “as a choice Of course, the
president in “committing to sending US troops to between war and peace”, says Kathrin Hille in narrowing polls and the
defend the island against invasion”. Given these the Financial Times. In contrast, both major drop in the approval
differences, any progress was likely to be limited opposition candidates “have called for a resumption rating of the prime
to the “grimly modest” goals of simply preventing of dialogue with China, which Beijing broke off minister, Anthony
relations “getting any worse”. after the ruling DPP came to power in 2016”. So, Albanese, doesn’t
It’s almost certain that the Biden-Xi meeting it’s logical to assume that “the Chinese Communist necessarily mean that
“will not change the direction of US-China party is likely to employ fewer military threats at punters are wrong to
relations”, says Agathe Demarais in Foreign Policy least temporarily if the opposition wins”. Still, the put Labor ahead,
especially considering
magazine. It won’t be a complete waste of time, long-term implications are more uncertain and the that current Liberal
though, because “the simple fact that the leaders election remains “hotly contested”, even if the deal leader Peter Dutton has
of the world’s two biggest economies are talking to “sharply increases” the opposition’s chances. a reputation for being
divisive. Still, the fact
that the gap is so small
PM opens old wounds in Spain means that punters are
possibly overestimating
Following weeks of return from exile, and powers” – the European the chances of a Labor
“tortuous others to escape the Commission has already victory, so a Coalition
negotiations”, threat of expressed reservations. It could victory seems to be a
Pedro Sánchez prosecution. also revive an independence value bet.
(pictured) has The deal has movement currently opposed As well as betting on
outlined a deal already been by a majority of those in a Coalition victory, I’d
that will have denounced by Catalonia; 40% of Sánchez’s own also put money on the
him staying on many on the right voters dislike the deal. next federal election not
as Spain’s prime as “grubby” and Still, it’s not clear what taking place until 2025 at
minister in return illegitimate, and Spaniards who oppose the deal 1/3 (75%) with Bet 365.
for an agreement to triggered protests can do – “except look on in In theory the
pardon thousands throughout Spain. horror”, says Jim Lawley in The government can call an
involved in Catalonia’s Those who accuse Spectator. Sánchez “looks early election at any
illegal independence Sánchez of a coup go too far, but certain” to get the votes he time within three years
referendum in 2017, says The opponents of the deal have a needs and is “unconcerned” by of the last vote.
Economist. The deal will see point, says María Ramírez in The opposition from Brussels or his However, you’d have to
five regional separatist parties Guardian. For one thing, the own citizens. He is playing for go back to the late 1990s
fall behind Sánchez’s Socialists amnesty, which was apparently time and hoping critics will to find an election that
and their coalition partners in ruled out by Sánchez before the come to accept the amnesty as was called significantly
return for an amnesty that will summer’s election, poses “a a fait accompli – leaving the earlier, and I don’t think
©Getty Images

allow Carles Puigdemont, who serious challenge to the rule of “deep, nationwide disgust at that Albanese is likely to
organised the referendum, to law and the separation of what he’s done to fester”. break with convention.

moneyweek.com 17 November 2023

12
Washington, DC
Thanksgiving prevails: Members of
the House of Representatives, where the
Republican Party has a slim majority, have
approved a Republican plan to continue
funding federal agencies until early next
year, says Katy Stech Ferek in The Wall
Street Journal. The two-thirds threshold
to pass the short-term “spending patch”,
known as a “continuing resolution” (CR),
was achieved to avert a partial government
shutdown. “Lawmakers had little appetite
for brinkmanship just ahead of their
News
Thanksgiving break [on Thursday], opting
for a ‘clean’ measure that extends funding
at current levels, but pushes off fights over
issues, including border security, federal
spending levels and Ukraine funding [until
later].” All but two Democratic Party
members supported the special measure
brought by new House speaker Mike
Johnson, against 93 Republicans who
rebelled over a lack of spending cuts and
security provisions. The bill now passes
to the Democratic-controlled Senate for
approval and then President Biden would
sign it, according to the White House.
“The subdued tone [in the House]...
came amid various blowups around Capitol
Hill, adding to the sense that members were
eager to get out of town” and that tempers
were starting to fray. In the Senate, one
senator was admonished for challenging a
witness to a fist fight during a hearing. “It’s
time to pass the CR and get the hell out of
here,” said another. “Everybody can calm
down.” Until early next year, that is.

Hollywood
Strike ends: The Hollywood actors’ strike came to an end on 8 November, with actor
Kevin Bacon (pictured) among the stars celebrating. After 118 days, SAG-AFTRA,
the union for actors and performers, succeeded in negotiating a “tentative
three-year agreement with the Hollywood studios”, securing
“significant improvements in pay, benefits
and pensions and preliminary guardrails
around artificial intelligence (AI)”,
say Paul Hardart and Jhodie-Ann
Williams on Bloomberg. The use of
digital likenesses was a “major sticking
point,” says Jeremy Hsu in the New Scientist. The
agreement requires film and TV companies to ask permission from
actors or their estates or heirs, along with providing compensation.
It remains to be seen how the agreement will hold up in the face
of rapid developments in AI. Competing with virtual versions of
actors could mean fewer jobs. Prior to this $1bn deal, Hollywood
had already faced significant headwinds. The public’s appetite
for stories may remain undiminished but writ large, the disruptive
technology that is streaming is challenging the incumbent business
model to “either adapt or face extinction”. Ultimately, customers,
already facing subscription fee increases will be left footing the bill.

São Paulo
Natura sells The Body Shop: When British ethical (£728m) in revenue last year,
beauty entrepreneur Anita Roddick (pictured) down 24% from 2021, as the
sold The Body Shop to French cosmetics giant brand has “struggled to adapt to
L’Oréal in 2006, “cynics predicted it would lose the digital age”. “The discounted
its mojo”, says Lex in the Financial Times. That price gives a whiff of distress,” says
damage has only got worse under the subsequent Sharon Lam on Breakingviews. But
ownership of Brazil’s Natura. So, it’s little wonder if Aurelius can increase The Body
Natura is now selling it to Munich-based private Shop’s revenue by 6.5% a year
equity group Aurelius. But Aurelius is only paying for five years and double its
£207m, compared with the €1bn Natura paid Ebitda margin to 15%,
in 2017 – and £90m of that is contingent on it would generate an
performance targets being met. The £117m that internal rate of return
Natura will receive immediately only values The of 30%, assuming
Body Shop at two times last year’s earnings before Aurelius funds the deal
interest, taxes, depreciation and amortisation with $100m of debt.
(Ebitda), compared with 11 times for Natura Either way, it’s a risky
itself and 25 times for L’Oréal. But then the makeover, “even when it
British-based chain only pulled in BRL4.4bn comes this cheap”.

The way we live now... what influencers are really hiding

“Influencers – the (usually female) people behind the most popular accounts on
Instagram, TikTok and YouTube – have large followings, often in the hundreds of
thousands or millions”, says The Economist. That has enabled some of them to
sign lucrative sponsorship deals. And while influencers have often been labelled
as the product of a narcissistic streak in younger generations, and a by-product of
indulgence in celebrity culture, their financial acumen cannot be denied any
longer. Roughly 50 million people around the world describe themselves as
influencers, according to Forbes. Goldman Sachs predicts the industry will double
to nearly $500bn by 2027. They have come to personify the modern world, where
anyone can “benefit directly from their labour” and hard work. “Influencing” now
even plays a hand in big business and politics. However, while this has been a
boon for the stars themselves, there are concerns about the links between many
influencer brands and exploitative practices. According to author Symeon Brown,
the influencing industry hides a vast underbelly of “scammers, surgeries, [and]
©Getty Images

racism”. This is the real effect on society, he says – “making exploitation more
Just a bit of harmless fun?
accessible, widespread and far wilier than it was in its pre-internet days”.

17 November 2023 moneyweek.com

 News 13
London
Inflation dips: A “wave of euphoria… washed over Wall Street” this week after
“softer than expected” data showed the annual pace of rising consumer prices in
the US fell to 3.2% in October from 3.7% the previous month – and to within sight
of the Federal Reserve’s 2% target, eliciting hopes of interest-rate cuts, says
Susannah Streeter of Hargreaves Lansdown. In the UK, inflation also “made a
bigger than expected jump down in its difficult descent”, falling from 6.7% in
September to 4.6% last month – enough for prime minister Rishi Sunak to say he
has delivered on his promise to cut inflation by half. Really, it had more to do with
the Bank of England’s spate of rate rises, the dwindling of pent-up pandemic-era
demand and last month’s energy-price cap cut. Food price inflation has also
slowed. But inflation’s downward descent “may still become stuck in the mud of
viscous wage growth”. Average earnings growth, including bonuses, fell only
slightly, from 8.2% to 7.9%, in the three months to September, compared with a
year earlier. Meanwhile, GDP expanded 0.6% year on year in the third quarter. In

©Getty Images
other words, expect the downward trend to “stall over the next few months”, says
Paul Dales of Capital Economics. The Bank “won’t feel comfortable” cutting rates Sunak: taking the credit
until late in 2024”, rather than in the middle of the year as markets expect.

Beijing
Bank hack embarrasses China: The Industrial
and Commercial Bank of China (ICBC),
China’s biggest lender, has paid an
undisclosed ransom following a ransomware
attack, according to Lockbit, a cybercriminal
gang, says James Pearson for Reuters. Lockbit
targeted the bank’s US arm, paralysing ICBC’s
computer systems and even disrupting the $26trn
US Treasury market. Amid the blackout, US
investment bank BNY Mellon was temporarily
owed $9bn by ICBC, “an amount many times
larger than its net capital”. Lockbit has successfully
targeted around 1,700 US organisations, along
with Britain’s Royal Mail and the City of London,
in every industry from financial services and
food to schools, transportation and government
departments. “These attacks breach client records,
giving hackers access to confidential information
and transaction history. Costs of remediation
and reputational damage can be high,” says
the Financial Times. “The average cost of a
ransomware attack was $5.1m this year,
according to IBM. That was up 13%
from a year ago.” It’s a trend that only
looks to accelerate, as generative artificial
intelligence (AI) increases the “pace, scale
and effectiveness of cyber attacks”. Time,
then, for China’s cyber-security industry,
long over-shadowed by “the country’s
focus on growing its home-made chips
and AI sectors”, to step up. The global
cyber-security market is forecast to double to
$500bn by 2030. China needs to get going.

Baar
Glencore seals coal deal: London-listed Swiss commodities giant
Glencore has clinched a $9bn deal for the coal division of Canada’s
Teck Resources, says the Financial Times. It will pay $6.9bn in
cash for a 77% stake, with Japan’s Nippon Steel and South Korea’s
Posco owning the rest. Glencore will merge the business with its
own coal assets and spin off the combined unit within two years.
The deal “marks the end of Glencore’s long and fractious pursuit
of Teck” which began in April with a $23bn unsolicited bid for the
whole company. It isn’t over the line yet – Canada’s government
still needs to give its approval, and a lot could happen to the price
of coal, used in steel manufacturing, between now and the spin-off
date. Even so, “talk about eating your cake and still having it”,
says Lex in the same paper. Glencore had said it wanted to get out
of dirty coal. And yet it has been happily “[hoovering] up the coal
assets other mining groups wanted to cleanse themselves [on the
cheap]” and banking the cash flows. As the spin-off date nears,
expect the Swiss giant to row back on closing some of its older
mines, as it has in Colombia. Glencore is also paying Teck a good
price. In passing the polluting buck, “vendor and acquirer have
ensured they will make a few of their own along the way”.
moneyweek.com
Tokyo
Beauty market turns ugly: Shares in Japan’s
cosmetics group Shiseido fell 14% on Monday,
wiping ¥280bn (£1.5bn) from the company’s
market value, and sending the stock to a six-
year low, says Hiromoto Deguchi on Nikkei
Asia. Shiseido now projects consolidated net
profit of ¥18bn for 2023, down by 47% from
last year. Chinese consumers have shied away
from Japanese products following August’s release
into the Pacific of waste water left over from Japan’s
2011 Fukushima disaster. In 2022, China – Shiseido’s
biggest market – accounted for 27% of its sales, worth ¥258.2bn
and more than the ¥237.6bn-worth of sales in its home market.
Shiseido’s president Kentaro Fujiwara (pictured) assured investors
the issue would be temporary. But “wrinkles in the beauty industry
are showing up much further away than Japan”, says Jacky Wong
in The Wall Street Journal. US cosmetics giant Estée Lauder has
also “witnessed a big slowdown” in China, reflecting the woes in
the wider retail sector. “Beauty is fleeting – and China’s economy is
undergoing a head-to-toe makeover.”
17 November 2023
14 Briefing

Bridging the wealth gap

Every generation thinks they have it tough, but the evidence shows that today’s 30- to 40-year-olds
really are getting a raw deal. That is ultimately a political choice. Simon Wilson reports
What’s happened?
A report compiled by economists at the
Resolution Foundation, published this
week, has laid out the extent to which
Britain’s “millennial” generation (defined
here as people born between 1980 and
2000) are worse off than previous cohorts
were at the same stage of life. For example,
the authors found that millennials born in
the late 1980s earned, on average, 8% less
at the age of 30 than their counterparts
from Generation X did at the same age
(Generation X is defined as people born
between 1966 and 1980, and therefore
now aged between 43 and 57). The audit
also found that the typical weekly pay of
graduates aged 30-34 fell by 16% in real
terms between 2007 and 2023 (though
equivalent non-graduate pay fell by only
6%). Overall, it found that the long-term

©Getty Images
effects of the financial crisis have left British
millennials struggling to catch up with the The young have been locked out of home ownership
living standards of older generations. The
authors contrasted this with the situation in by £5.9trn. Some 73% of that increase has Is the whole issue exaggerated?
the US, where their American counterparts been accumulated by people born between Every generation thinks they have it tough,
have closed the gap much faster. 1956 and 1975 (people now in their late says The Economist. Houses might have
40s to late 60s). Those generations are been cheap in the 1960s, but “petrol had
For example? richer and younger than previous cohorts, lead in it, men dropped dead in their 60s
In the US, millennials in their early 30s but the next generation has significantly and women couldn’t open a bank account in
were earning 21% more in real terms in missed out. For example, the average Briton their own name”. People paying mortgages
2021 than people in the same age group in their early 60s in 2018-2020 had nearly in the early 1990s struggled with rocketing
were in 2007. In the UK, incomes were still £170,000 more in assets than counterparts interest rates. And it is normal for people to
1% lower for this group. “Young people of the same age 12 years earlier, before get wealthier as they get older. But it really is
across advanced economies were hit by the the financial crisis. But the average person true that some generations get a better deal
financial crisis, putting a stop to decades in their late 30s had almost £30,000 less. than others. Someone born in 1956 will pay
of progress,” says the report’s co-author, According to Centre for Policy Studies (on average) about £940,000 in taxes over
Sophie Hale. “Fifteen years on, this ‘crisis analysis, the share of national wealth owned their lifetime, but receive state benefits of
cohort’ are no longer young.” Many US by over-55s has risen 11 percentage points around £1.2m. Someone born in 1996 will
millennials have bounced back, but their since the financial crisis; the share owned by get less than half that from the state – and
counterparts in Britain still bear “economic under-55s has fallen by the same amount. barely more than someone born in 1931, a
scars as they approach middle age”. decade before the term “welfare state” was
What’s going on? first popularised. “A fundamental part of
Why the lack of progress? The main driver is the long-run property the social contract has broken down”, and
Broadly, it’s a function of the stagnant UK price boom, which has boosted the wealth today’s generation of 30- and 40-year-olds
economy and low productivity that have of homeowners while locking many really are getting a raw deal.
limited economic younger people out
prospects for pay and
“Millennials earned on of home ownership. So what can be done?
income progression, average 8% less at age 30 than At the start of the A second report published this week
while what growth
there has been has
their Gen X counterparts” century, 67% of
households aged
from the Centre for Policy Studies is full
of proposals on how to close the gap
favoured older generations. It’s also the 30-34 were homeowners, but by 2021 between young and old. These include
result of policy decisions with age-specific this figure had fallen to 47%. Taking the encouraging home-ownership through
effects, according to the report. For wider 25-34 cohort, the proportion that planning reforms, and supporting long-
example, the triple-lock on state pensions owns their homes is currently just 28%, term, fixed-rate mortgages and gradual
has helped retirees, but there have been down from 51% in 1989. Pensioners now ownership structures. They also include
explicit cuts to working-age benefits, and have higher disposable incomes than fostering cheaper childcare; reforming
a switch from RPI to the (usually lower) working households, on average, and the student loan system; and a range of
CPI inflation measure to calculate rises. although one in five lives in poverty, one reforms to pensions, social care, and the
Nor is the intergenerational gap just in four lives in a household with assets of NHS. Ultimately, the drift towards
about current incomes. In terms of overall more than £1m. Some argue that an era greater generational inequality is a
wealth, millennials are not keeping up with of broadly higher interest rates might help choice, says The Economist. The fact that
previous cohorts. to smooth out generational inequality by Britain’s homes are small and expensive
puncturing asset prices. On the other hand, “is not a law of nature, but a choice of
What are the figures? the burden of higher mortgage rates will successive governments”. The fact that
Total net wealth in the UK has surged from disproportionately hit younger working our tax system is tilted towards income,
about three times GDP in the mid-1980s people (two-thirds of those who own their not wealth, is a policy decision. “The
to more than seven times in 2020, growing homes outright are retired). government could choose differently.”
17 November 2023 moneyweek.com
16 City view

A Christmas gift we could do without

The blockbuster seasonal TV advertisement has had its day – it’s time to put it to rest
Matthew Lynn may not actually
City columnist
bring in many
new customers.
It has become as much a part of the Secondly, it
festive season as trees, turkey and family easily strays into
arguments. Led by John Lewis, companies controversy. This
started producing landmark Christmas year M&S was in
advertisements, to be released every trouble because, if
November. As much a mini-motion picture you looked at its
as anything else, they spin out into hit songs, advert in a certain
provoke discussion on social media, and, in way, it seemed to
theory at least, get everyone in the mood to some minds that
spend lots of money over the holiday season. burning Christmas
There have been some memorable hats looked like

©John Lewis
John Lewis’s ads are all-time classics – but
hits over the past few years. John Lewis’s the Palestinian there might be better uses for the money
“Monty the Penguin” from 2014 is one of flag. Greggs has
the all-time classics, as is the Sainsbury’s been in hot water because in one ad it £88bn of retail sales revolve around the
offering from the same year, when it teamed replaced the baby Jesus with a sausage festive season in the UK, once presents,
up with the Royal British Legion to mark roll, which some found very offensive. decorations and food are all added together.
the 100th anniversary of World War I. Meanwhile Asda stirred up controversy For some retailers, the percentages are even
with a “Christmas Mums” advert in 2012 higher, with most of the profits for the year
Money down the drain that was deemed offensive to women. The generated in a few weeks in November and
In many ways, the Christmas ad has list goes on. There is a reason for that – December. Without that Christmas boom,
become a minor artwork, and, in fairness, ad agencies are so desperate to create an many of them would go under. Advertising
even the corniest examples of the genre can impact they keep pushing the boundaries. is a key part of driving up sales and keeping
bring a tear to the most cynical eye. Even The trouble is, it then backfires and ends competitors at bay. No one would argue
so, we have got to the point where the blunt up doing more harm than good. retailers should stop marketing themselves.
truth is that the blockbuster Christmas ad is The first generation of blockbuster And yet, the big budget, splashy ad
doing more harm than good. ads launched almost two decades ago featuring snowmen and elves is looking
Firstly, it costs way too much to produce. had plenty of impact and may well have about as fresh and original as a re-run
A typical John Lewis Christmas ad is driven some extra sales. By now, everyone of a Gavin & Stacey Christmas special.
reported to cost at least £1m to produce, has seen dozens of them, and they don’t There’s nothing wrong with a few posters
with another £5m to £7m spent on TV slots, make much of a difference any more. The proclaiming 20% off wrapping paper and
and pushing it out on social media. Similar impact of any sort of marketing campaign mince pies for the rest of the week. But that
sums are spent by M&S, Sainsbury’s, gets less and less the more often it is used, should be about it.
Tesco, and many other retailers (Lidl’s is and Christmas ads definitely fall into that The millions spent on a big budget
presumably made on a slightly more modest category. Far better to spend the money on three-minute film with Hollywood
budget). Each one is about as original as the something new instead. production values would be better off spent
new Marvel film. on refurbishing stores, lowering prices, or
For a chain such as John Lewis, which A wonderful time for retailers just being returned to shareholders. The
has been slimming down stores and may Christmas remains one of the most Christmas ad is no longer generating the
have to lay off staff, it is a huge amount important times of the year for huge returns it once did – and it would be better
to spend on a promotional campaign that chunks of the economy. An estimated to finally put it to rest.

City talk
l ”The tease continues at
Flutter,” says Nils Pratley in The
Guardian. The owner of the
Paddy Power and Betfair
gambling sites plans a
secondary listing in New York
and is dropping hints that
London won’t be its primary
home forever. Closer links to
the US make sense – analysts
forecast that America will
account for £3.8bn of its £9.7bn
revenues next year. More than
40% of its shareholders are
US-based. Still, the loss of
another FTSE 100 stock after
BHP and Ferguson would be
“morale-sapping” for London.
Officials here should spend
less time worrying about the
dearth of “dreadful” new
It would also be helpful to
ditch stamp duty on shares – a
0.5% tax on every purchase,
versus zero in the US.
“Persuading HM Treasury to
give up any receipts is a tough
gig, but you’ve got to try.”
l Arix Bioscience is trying to
pull off an “unhinged” deal,
says Alistair Osborne in The
Times. The board, headed by
chair Peregrine Moncreiffe, has
agreed to sell its assets to RTW
Biotech, a listed life-sciences
investment fund, at a chunky
discount to its net asset value of
177p per share. US-listed
Acacia Research, which owns
25.5%, will get 143p per share in
cash, but other Arix investors
$1.11. Arix’s broker Peel Hunt
has quit, saying the price is
“opportunist and
undervalues Arix’s
portfolio”. Arix
says the
alternative is a
fire sale of
assets after its
CEO jumped
ship, but this is an
“inequitable dog’s
breakfast of a deal”,
according to Osborne. A
better solution must be
possible. “Shareholders should
kick out Moncreiffe if he can’t
find one.”
l When Martin Sorrell
(pictured) set up S4 Capital to
likened his initial success to a
torpedo boat taking on an
aircraft carrier, says Ben
Marlow in The
Telegraph. But the
only thing he has
torpedoed recently
is the share price. S4
blames lacklustre
results on a weak
advertising market,
but its many
problems over the
last two years point to a firm
that made “too many
acquisitions too quickly”.
Sorrell’s “revenge dream” of
up-ending the ad industry after
his acrimonious exit from WPP
is dead. “The smart move
might be to seek an elegant exit
©Getty Images

listings and more shouting would get shares worth just outdo advertising giants such before his reputation is
about established successes. 132p at RTW’s current price of as his old empire at WPP, he irreparably damaged.”

17 November 2023 moneyweek.com

18 Investment strategy

Little reward for more risk Guru watch

Hao Hong,
chief
economist,
Corporate bonds pay a slightly higher ICE BofA US Corporate Index spread Grow
Option-adjusted spread, percentage points
yield than governments, but spreads 8
Investment

aren’t generous by past standards “The biggest

6 normalisation of

©Getty Images
2023 is that China
Cris Sholto Heaton emerged from Covid,” says

Source: St Louis Federal Reserve

Investment columnist 4 Hao Hong, the outspoken
Average = 1.5% strategist who left China’s
Bank of Communications
In recent updates, I’ve looked at the role of 2 after a series of bearish
government bonds in the MoneyWeek exchange reports last year, and now
traded fund (ETF) portfolio. From next week, I’ll 0 works at Shanghai-based
wealth manager Grow
move on to review our equity positions. But first, 1997 2002 2007 2012 2017 2022 Investment. While “an
let’s talk briefly about corporate bonds. extended period of
These aren’t a core part of the strategy, because This is probably a fair overall summary and seclusion” caused by the
they don’t generally add much. Conventional shows the current spread is a little below the pandemic has cast a shadow
government bonds offer a safe haven. Inflation- average over this period. over prospects for the
linked ones promise a guaranteed real return. Note also that after many years of low rates, Chinese economy, the
Both reduce risks. Corporate bonds add credit many companies are carrying plenty of debt. coming year should bring
risk: they pay higher yields than government Some will struggle as they need to refinance this some improvements in
bonds, but you lose part of that if some default. on higher yields. Defaults are likely to rise – they China’s relationship with key
foreign partners.
Over the past 50 years, US corporate bonds are already ticking up. All told, it’s hard to feel
One of the main factors
have beaten ten-year Treasuries by around 1.2 that today’s spreads offer extra compensation for weighing on Chinese stocks
percentage points per year. Equities have done a the risks. So there is little obvious opportunity has been weakness in the
lot better. So we’d rather take our risks in equities. here for the portfolio at present. renminbi. However, since the
Of course, if corporate bonds were unusually gap between interest rates in
cheap relative to other assets, they would become Fallen angels and higher yields the US and China appears to
more attractive. Over most of the past decade, Perhaps the most interesting area for us is fallen have peaked, this weakness
with yields heading ever lower, that was never the angels – bonds that have been downgraded from looks likely to abate in the
case. Yields today are higher – but so are yields investment grade to junk. Since some investors coming months. Meanwhile,
Chinese consumers’
on government bonds. The spread between the are forced sellers in this situation (see below),
confidence in the outlook for
two has not expanded to an extent that makes these often trade cheaper than their fundamentals their incomes is improving,
corporate bonds look exceptionally compelling. would justify. Over the long term, fallen angels which bodes well for
have outperformed corporate bonds as a whole. consumption and the
A little below average Anomalies like this can be a useful way to add strength of the domestic
Credit spreads vary depending on the borrowers’ value. With fallen-angel indices now yielding economy. Thus the outlook
credit rating. For example, the spread for ICE around 8%, they look a little tempting. There for Chinese shares – both in
BofA AAA US Corporate index (ie, top-rated are a handful of ETFs in this area such as iShares the mainland markets of
borrowers) currently stands at 0.44 percentage Fallen Angels High Yield Corp Bond ETF (LSE: Shanghai and Shenzhen and
in Hong Kong – is “neutral to
points (pp). The spread for BBB borrowers, the RISE). However, spreads on fallen angels are still
positive”. In particular, “the
lowest investment-grade rating, is 1.55 pp. Some tight compared to history, while this particular brutal sell-off in late October
groups are a bit higher relative to history than ETF has lagged its index by more than I’d expect 2022 should be an important
others, but none look generous. The chart above over the past five years. I will be looking at this low of the current cycle” for
shows a near three-decade history for a composite sector closely as the credit cycle turns – but I’m not Hong Kong. Back then, the
index of US corporate bonds of all ratings. yet convinced this is the time or way to invest. Hang Seng index dropped to
15,000 – today it stands at
Bonds with ratings equal to 18,000 and a rise to around
I wish I knew what credit ratings were, or above BBB- (or Baa3 on 23,000 looks possible.
but I’m too embarrassed to ask Moody’s scale) are referred
to as investment grade, while
This encouraging outlook
assumes a soft landing in the
When a company, government can be seized and sold, then it’s those with lower ratings are US as the Federal Reserve
or other organisation wants to likely to be safer than a debt known as sub-investment ends its cycle of tightening
borrow money by issuing with no collateral). For bonds grade, speculative grade, policy to combat inflation.
bonds, their bonds will usually issued by countries, factors high yield or junk bonds This would narrow gap
be assigned a credit rating. This include the strength and (depending on how positive between yields in the US and
gives the investor an idea of weaknesses of the economy, you want to sound). China, to the benefit of the
how likely they are to get their the current level of debt, the Bonds that are cut from renminbi, as well as boosting
money back on time and in full. soundness of fiscal and investment grade to junk are the global economy. Solid
These ratings are issued by monetary policies and the known as fallen angels. Many external demand would give
credit-rating agencies such as quality of institutions. funds are only allowed to the battered Chinese
Standard & Poor’s, Moody’s Ratings run from AAA (or hold investment-grade property market time to
and Fitch. When determining a Aaa on Moody’s scale) for ultra- bonds and may be forced to recover – if not fully, then
rating, the agency will look at low-risk bonds – issued by a sell in these circumstances. enough to “muddle
several factors that may small number of wealthy major This can easily push the price through”. While China’s
influence the likelihood of the economies, very high-quality of new fallen angels below ageing population and
bond being repaid. These institutions and blue-chip what might be justified by diminishing demand for
include the profitability of the companies – down to D (or C on their fundamentals. For this property will create some lag
issuer, its past credit record and Moody’s scale) for those that reason, fallen angels have on its markets, the economy
any assets the debt might be have failed to make an interest had higher average long- has bottomed and can
secured against (if a debt is or capital payment on time and term returns than any other probably grow at 5% this
secured against property that are therefore already in default. grade of corporate bonds. year and next.

17 November 2023 moneyweek.com

20 Best of the financial columnists
Why China China is not becoming the artificial intelligence (AI) superpower that many
feared, says Nina Xiang. Despite China’s stated goal of being the AI leader
Money talks
is losing by 2030, Chinese tech firms are “struggling to catch up” with US rivals.
Why? Innovation in AI is not a “linear process”. The impact of ChatGPT
“All that money
and he’s still
got hair like
the AI race has been greater than that of thousands of Chinese AI startups. Additionally,
Xi’s crackdown on private tech firms hinders free expression and
a… dinner
lady.”
Nina Xiang entrepreneurial spirit. State approval would be needed to even test ChatGPT Boy George
Nikkei Asia alternatives on the public. Moreover, in the current environment, it is hard on Elton
for Chinese firms to “make long-term plans and investments, attract and John
retain talent, and comply with erratic regulation”. The rise of Chinese tech (pictured),
firms was enabled by the global ecosystem, including “spillover from US quoted in the
Evening Standard
investors and talent”. The tightening of US export controls will make it
difficult for the Chinese to “secure the advanced chips they need to simply “When people say that
reproduce new AI technologies coming out of the US”. The biggest threat money doesn’t matter
to US AI leadership is supply-chain vulnerabilities for critical materials they have never been poor.
such as rare-earth elements. This should be its focus, along with fostering It’s one of the
collaboration to “promote a global standard for technology security”. most idiotic things
people say. On the other
hand, huge amounts of

Don’t fear After a decade of “rock-bottom” interest rates, a Schumpeterian wave

of creative destruction may be no bad thing, says the Financial Times.
money doesn’t make
people happy. But having
enough to feed your
a zombie Corporate bankruptcies in the US are due to hit their highest level since
2010; they are surging in England, Wales and the eurozone, too. This is set
family and pay your
bills does. Having zero
apocalypse to continue as businesses are forced to refinance on higher rates, bills rise
and demand slows. But the truth is many firms would have already gone to
money is s***.”
Actress Caroline Quentin,
the wall without Covid-era support. Zombie firms “proliferated” in the era in The Sunday Times
Editorial
Financial Times of low rates; in 2021 they comprised 10% of all listed firms globally. These
firms “sap” productivity by “lowering investment and employment for “For us, solo diners are
more efficient businesses”. Nevertheless, the process is not without risk. If some of the best diners
we have. They tend to
the collapse of weak firms spread to more efficient ones in the supply chain,
spend more… I’m not
that “would be problematic”; it is hard to gauge the risks associated with saying this happens
zombies’ exposure to private capital markets; ongoing state support could every time, but a month
allow some firms to limp on. Regulators should therefore boost monitoring ago we had a diner spend
of private markets, and insolvency services must ensure firms can “fail well, £10,000 on his own.”
and fast”. Job search support will be needed. However, given “buoyant” Chef Michel Roux Jr on
start-up activity, the situation should be embraced, not feared. his two-Michelin star
London restaurant Le
Gavroche, quoted in the

Tempting Supporting state surveillance may sit “awkwardly” with the libertarian
values espoused by many Silicon Valley tech luminaries, but as the industry
Financial Times

“Sometimes people are

profits in “seeks out new frontiers of growth”, selling to the state is back in fashion,
says The Economist. A quarter of US police forces now use drones.
like: ‘Cardi’s not focused
on her music. She’s just
snooping Satellites offer another form of “aerial snooping”. Techies are now selling
tools to help the police manage this “profusion of images and information”.
trying to make money
with all these partnerships
Ambient.ai, for instance, offers tech that “automatically monitors cameras and business stuff.’ That is
Editorial not true. I am focused on
The Economist
for suspicious activity”. For newcomers that “gain a foothold, the rewards
can be rich”. Word of mouth can spread fast and the US has 18,000 police my music, but I have to
make sure that I make a
departments. Relationships with government buyers tend to be long-lived.
future for my kids. I always
Bigger firms are adapting, too, with the likes of Motorola acquiring tech have a fear that, God
start-ups. Although Amazon, Microsoft and IBM stopped providing facial- forbid, you never know if
recognition services to law-enforcement agencies in 2020 over privacy something happens to me,
concerns, surveillance is “likely to remain lucrative”. Drones can also assess I want them to be set.”
infrastructure for damage; satellite imagery can count cars in retailers’ lots American rapper Cardi B,
to gauge revenues. “The trend towards greater surveillance, whether by big quoted in Essence
brother or big business, looks unlikely to reverse.”
“I couldn’t possibly
put a number on that. But

Bring on
let me put it this way. After
Crypto can seem complicated, but what Sam Bankman-Fried did “was this call, I have to drive
simple”, says The Washington Post. He took money deposited by customers off and put some winter
the crypto on his FTX exchange to buy cryptocurrencies and gave it to a trading firm,
Alameda Research, which he also owned. The cash was then funnelled into
wheels on the Porsche.”
Justin Hawkins, frontman
regulators bets on existing crypto tokens, illiquid assets affiliated with his businesses
– and other things such as buying houses for his cronies. But if crypto
of The Darkness, on how
much he earns in royalties
seems “beside the point” (the firm broke the law and the assets in which it from the song Christmas
Editorial Time (Don’t Let The Bells
The Washington Post self-dealt might appear irrelevant), the “nature of the industry helped bring
End) every year
about its downfall”. FTX “didn’t have many rules to follow when it came
to liquidity, conflicts of interest or much of anything else”, and it didn’t “The life of an artist,
have a regulator “looking over its shoulder”. Secondly, the reason Alameda until you make ‘f**k-you
couldn’t pay FTX back and therefore pay customers back was because money’ – which I haven’t
its funds were tied up in so-called Samcoins, which had never had any made yet – is still
real value because crypto is a “near-useless commodity” whose stability cheque-to-cheque.”
depends on “belief in its intrinsic value among those holding it”. Subjecting Billy Porter on his
©Getty Images

these entities to the same rules as their “fuddy-duddy off-blockchain struggles in the actors’
counterparts” would destroy “much of their raison d’etre”. Bring it on. strike, in The Guardian

17 November 2023 moneyweek.com

 Best of the blogs 21

The uprooting The end of the extended family will

have momentous effects for China

of China
conversableeconomist.com
China’s evolving population
structure is “a story of how
demographic changes can
echo for decades”, with huge
implications for the economy
and society, says Timothy
Taylor. In the 1950s and ’60s,
the fertility rate in China
“social capital”. During China’s
period of dramatic economic
growth, and all the upheaval
that came with it as labour was
reallocated across industrial
sectors and people moved
from rural to urban areas, the
extended family provided a
support network and a way to

was four to five children per
woman, as a report from the
American Enterprise Institute
illustrates. If one person with
three to four siblings marries
another with three to four
siblings, and that couple has
children, then the children
will have six to eight aunts and
uncles and a lot of cousins, not
to mention great-aunts and
uncles from the generation of
the grandparents.
In other words, Chinese
people have long lived in big
families with ties to extended
networks of blood relatives.
This matters because extended
family networks are a form of
©Getty Images
spread information about job
opportunities and so on.
This may have had “highly
propitious implications for
guanxi”, the kin-based network
of personal connections that
has “always been integral
to getting business done in
China”, and been a “crucial if
underappreciated” element in
the rise of China.
The end of the golden age
This “golden era of the
extended family” is coming to
an end, however. Fertility rates
plummeted in the 1970s, and
have remained low since then,
not least due to China’s “one-
child” policy. The working age
population peaked in 2014,
and deaths exceeded births in
2022, meaning the population
has now declined. Multiple
generations of low fertility
will over time diminish the
extended family. Modelling in
the report suggests that, just
three decades from now, young
Chinese will on average have
only a fifth as many cousins
as young Chinese today. By
2050, almost no young Chinese
will live in families with large
numbers of cousins.
The coming generation will
have to get through life without
the support offered by the
extended family. This is likely
to have “momentous effects”.
The government will no longer
be able to rely on it to look
after children, the elderly or
the disabled. The social capital
that led to the economic boom
will erode. There may also be
implications for social control.
China’s extended family
networks are about to crash and
“the functions they have served
will be diminished as well”.

Getting nationalism right

project-syndicate.org
The next gold
rush
bloomberg.com/opinion
The world seems to be entering a “new era of economic nationalism”, as many countries prioritise their When an industry is chock full of
domestic social, economic and environmental agendas over free trade, says Dani Rodrik. Economic young people with no particular
liberals worry that we are seeing a 1930s-style return to protectionism and autarky. But the truth interest in or talent for their
is that economic nationalism comes in many different forms, not all of which are harmful. When work, but are merely there to
earn big money and retire early,
“applied judiciously in pursuit of legitimate domestic goals”, it can be beneficial without harming other you know the end of the bubble
countries. Indeed, focusing on the national economy can be “perfectly benign” as it is compatible with is in sight, says Allison Schrager.
significant openness to international trade and finance; a country that pursues autarky will “foresake Before 2008, that industry was
the benefits of specialisation, miss out on frontier technologies and lose access to foreign capital”. The finance. For now, it is tech.
history of the rise of the US, as well as the more recent examples of China, Japan and South Korea, The tech industry was a
show the benefits that come from choosing a mix of policies that encourage economic integration and productive place for students to
selectively protect key industries. Done well, such policies are “national projects of renewal”. “Local take their talents. It is full of
manufacturing capacity, technological autonomy and export competitiveness” are the “essential innovative companies claiming
foundations of domestic political legitimacy, national security, and international status and prestige.” to make the world a better place,
and some graduates will start
their own businesses, creating
jobs. But there is a limit to how
How Britain
Even then, the impulse was be protected from themselves”.
not new. The state first got fully Those who “fear similar net-zero many people an industry can
involved at the start of the Boer campaigns” – against alcohol, “richly reward”, and those limits

quit smoking War, when as many as three

unherd.com
Rishi Sunak’s proposal to ban
smoking is the completion of
an agenda that began long ago,
says Alwyn Turner. When an
episode of Yes, Prime Minister
back in 1986 featured a
politician proposing a complete
ban on all tobacco sponsorship
and advertising, and a ban on
smoking in all public places,
©Getty Images
in ten potential recruits were
too feeble or ill to serve, thought
in the main part to be due to
smoking. The war against it
then continued down to the
present day. Like our modern
culture wars, the divide
has not been between
left and right,
but between
“polite
society”
junk food, cars, fireworks and
so on – “might note with concern
the pattern of public response
to every step of the anti-smoking
pathway. First, complaints,
then ridicule, swiftly followed
by compliance and acceptance.
It took a while, but there was
no rebellion. That
studio laughter
on Yes, Prime
Minister is
the sound of
are being tested. People
entering now are already too
late – the big money comes from
nascent firms getting lots of
venture capital and eventually
going public or getting acquired
by a bigger company. That trend
has “fallen off a cliff”.
The likelihood is that the next
gold rush will be into green tech.
Even if interest rates stay high,
government money is flowing
in, offering capital without much
risk. That means green tech will
suck in lots of “obnoxious

the studio audience laughed. By and “those a different people” in it just for the money.
2006 they were public policy. who need to world.” “Such is the price of progress.”

moneyweek.com 17 November 2023

22
Infrastructure
funds show cracks
The sector’s trusts have fallen out of favour, but the
tide will turn, says Max King. Now is the time to buy
Over the past 15 years, the infrastructure sector has
boomed. It provided capital first for public-sector
projects in the UK such as schools, roads and hospitals,
then for such projects overseas, and subsequently for
private-sector projects that came with low-risk and
long-term cash flows.
In the early days, the politicians welcomed a structure
that resulted in projects being completed on time and on
budget at an overall cost far less than the public sector
had been able to manage. But in time, they became
resentful at being made a fool of by the scale of profits
produced by private finance initiatives (PFIs). PFIs were
restructured as public-private partnerships (PPPs) and
then stopped. The result of a return to public-sector
procurement has been the disaster of HS2.
The sector expanded with the first renewable-energy
funds launched in 2013. Funds, once listed, were quick
to take advantage of share prices trading above net asset
value (NAV) to raise additional capital for investment.
Investors received generous dividends, well above the
yield on long-dated gilts, and these increased broadly in
line with inflation. This ensured rising capital values,
though managers sought to keep these “conservative”,
so that new equity could be raised at a premium.
The total capital invested in the 34 listed
infrastructure funds is now £24bn, half of which is
accounted for by renewable energy. This sum includes
capital appreciation but excludes funds that have been
taken over and other returns of capital. In addition,
more than £50bn has been raised by 113 UK-based
unlisted funds, according to Preqin, a data and insight
provider for the sector. This includes £18bn for the
Hinkley Point C nuclear power station.
From boom to bust
This year, though, it has all gone wrong. Share prices
have dropped below NAV; equity issuance, both for
new and for existing funds, has dried up; and dividend
yields, sometimes more than 10%, have failed to attract
investors. Shares generally trade at discounts to NAV
above 20%, only two are at discounts below 10% and
none at premiums. Since no funds want to increase
borrowings, there is virtually no new investment and
there are plenty of assets for sale.
The slump in share prices is widely blamed on
soaring gilt yields, but this is highly questionable.
Christopher Brown of broker JPMorgan Cazenove
reckons that an appropriate benchmark for
infrastructure funds is the yield on 15-year index-linked
gilts, plus a risk premium of 2.5%. This benchmark has
risen from a negative yield in late 2021 to a current one
of nearly 3%.
But nobody believed that ultra-low bond yields
were sustainable. So “steady-state returns” (the long-
term annual return that shareholders should expect)
were always higher, representing a cushion against
higher gilt yields.
This cushion or “spread” was about 5% until
2020 for conventional funds, and until early 2022 for
renewable funds. It then, as expected, started to fall
as gilt yields rose. This year, though, the spread has
risen from 3% back to 5% for conventional funds
17 November 2023
Funds
©Getty Images
HS2 has been an operational and financial disaster
and from 4% in mid 2022 to 7.5% for renewable
funds. Factors other than rising bond yields are
clearly at work. Perhaps there is a lack of confidence
in valuations, which, for private-equity funds, are the
subjective judgement of professional valuers who may
be susceptible to groupthink. But infrastructure funds
have always had an incentive to keep valuations low
to facilitate equity issuance. Besides, there have been
a string of asset sales in the infrastructure sector at or
above asset value.
For example, 3i Infrastructure recently sold a
significant investment at a 31% premium to its
valuation, but was disappointed that it made no
difference to its discount. If the trust was trying to send
a message that valuations were modest, it didn’t work.
Likewise, HICL has sold eight investments from across
its portfolio at or above carrying values, generating
proceeds of £310m, but the confirmation of its
valuations and the reduction of debt hasn’t lowered its
discount. The reality is that infrastructure funds trade
off their inflation-linked dividend yields, not their NAV,
and dividend yields are not subjective.
Backlash against net zero
Renewable-energy trusts have suffered additionally
from the fall in electricity prices last year and from a
backlash this year against the net-zero agenda being
rammed down people’s throats. But the consequent
collapse in investment promises to support prices as
demand continues to grow, while income is bolstered
by long-term contracts and renewable-energy subsidies.
“Shares There is no likelihood that these subsidies will
be removed.
generally Are infrastructure funds too small given that
trade at overseas investors are happy to buy into larger
companies but not smaller? This would suggest a
discounts merger of funds but some are already large (five have
to NAV of assets of over £3bn) and that hasn’t helped. Besides,
shareholders would be unlikely to support a share
20%; in only merger with no cash exit. More importantly, sterling-
two cases is denominated yield funds operating mostly in the UK
have no obvious appeal to international investors.
the discount Fees and management costs have been a major factor
below 10%” in putting off wealth managers and there is a pressing
moneyweek.com
 Funds
“High
and rising
dividends
will, sooner
or later,
attract
investors
again”
need to make cost disclosures more comprehensible,
rational and useful. The problem is that a “one-size
fits all” figure for management costs, as insisted on
by regulators, is misleading and doesn’t enhance
competition between funds. A trust that manages
physical assets is bound to have higher costs than one
that just invests in liquid, listed shares.
A more detailed breakdown to make cost
comparisons more meaningful might help, but this
would add complexity and take time to gain regulatory
approval. The government promised to abolish the
KIID (key investor information document) required by
moneyweek.com
23
the EU and universally regarded as useless some years
ago, but nothing has yet happened.
In for the long haul
In addition, costs as defined by the KIID are
significantly overstated as they include, for instance,
debt costs, but they are still faithfully reported by
intermediaries and brokers. Yet arguing that investors
should pay more attention to the figure calculated by
the fund than independently according to a regulator’s
formula is tough. For example, Scottish Mortgage has,
over 15 years, halved its cost ratio from 0.7% to 0.35%
yet a figure of 2% is quoted by some platforms.
Trading at a sizeable discount to NAV gives some
trusts the opportunity to enhance NAV by buying back
shares. However, it is rarely effective in narrowing the
discounts, will raise the cost ratio as the trust shrinks,
and may just encourage more sellers. Besides, few trusts
have spare uncommitted cash (many have debt) for
buybacks without selling assets.
Trusts may have to accept that they are in for the long
haul and have little choice but to stick to what they are
doing and wait for the tide to turn. There are grounds
for optimism. A continued stream of high and rising
dividends will, sooner or later, attract investors again,
and the political, public and media hostility to private-
sector investment in infrastructure, evident for the past
20 years, is lessening.
With bond yields having risen sharply in nominal
and in real terms, government borrowing is becoming
very expensive and the disaster of HS2 proves, once
again, that public-sector procurement inflates costs and
delays completion. When this or the next government
faces up to the precarious state of public finances and
the many failings of public-sector projects, perhaps they
will revive PFI or PPP.
Returns will have to be attractive to draw in private-
sector capital, but before any new capital can be raised,
share prices will need to return to premiums. That, in
turn, will attract unlisted capital as well. The upshot?
Those who invest in the sector at the current irrationally
depressed prices rather than wait for the storm to pass
should earn the best returns.
17 November 2023
24 Opinion

Look beyond Earth

to fix energy crisis
Solar energy from space and a type of helium on the
Moon look promising, says Merryn Somerset Webb
Wind isn’t working. Or so it seems. New developments
are on hold both in the UK and in the US (where
one of the world’s biggest companies, Ørsted, has
just abandoned two big projects); the UK’s offshore
auction earlier this year attracted not a single bid. The
problem here, says Barry Norris of Argonaut, is that
wind is just “ too expensive to be commercially viable,
even with inflation-adjusted price guarantees which
protect suppliers against intermittency and supply
chain problems”.
This is partly about the rapidly rising cost of initial
production: “cheap” wind was to some extent a

function of low interest rates, low labour costs and low
commodity prices. But it is also a question of ongoing
costs – offshore turbines may last more like ten years
than 25 – and about the cost of intermittency (the
back-up energy required when the wind isn’t blowing).
The UK has poured a lot of energy and effort into
making wind the answer to the energy transition.
But, says Norris, that renewable energy is both more
expensive and less useful than most people think. As a
result fossil fuels, like it or not, aren’t going anywhere.
Shares in the various renewable-energy companies
out there seem to be with Norris on this. Most wind-
only indices are down by over 20% so far this year and
the S&P Global Clean Energy index (which includes
solar, hydro and biomass) is down by 25% year-to-
date (and up by a mere 2% over a ten-year period).
Ørsted’s stock has slid by 60% this year alone.
The same goes for the UK’s big energy companies,
which are fast pulling back from their low-carbon
promises and going instead for keeping oil output
high and gas output growing. Shell’s new CEO Wael
Sawan, for example, announced this week that he is
to cut 200 jobs in the firm’s “low-carbon solutions”
division and put another 130 under review.
He is also looking to sell French floating-wind
power specialist EOLFI, and earlier this month pulled
out of a contract with a US windfarm, preferring
to “pay a penalty rather than face rising costs for
building the project”, according to Reuters. The UK
government is clearly not convinced that renewables
will be powering much more of our economy soon
either. It plans to allow companies to bid annually for
new licences to drill for North Sea oil and gas.
Thinking outside the global box
So if wind is not the answer to our problems, or at best
no more than a logistically tricky part of the answer,
what is? There’s a tempting thought in Tim Marshall’s
recent book The Future of Geography. We can, he says,
rely on space. Earlier this year, scientists at Caltech
beamed back to Earth solar power that had been
captured on panels in space. It converted it into a form of
energy that can be wirelessly transmitted via microwave.
“The uranium
A receiver on Earth then converted it back to energy. price has
It was a tiny amount, says Marshall, but it provided
firm proof of concept: there is a chance that we are
jumped
“only a few years away from having fields of such by 125%
panels in space directing energy 24 hours a day” into
national or local grids. And if that doesn’t come off,
since the end
space combined with artificial intelligence (AI) might of 2020”
17 November 2023
©Alamy
There could be a million tonnes of helium-3 on the Moon
have another amazing solution for us: nuclear fusion,
for which we need lots of helium-3. There isn’t much
helium-3 on Earth (plenty of helium-4, the one we use
for balloons, but not much helium-3). However there
“may be a million tonnes of the stuff on the Moon”.
You might think that of little interest right now,
given that despite decades of work we have not yet
cracked fusion. But that is where AI might come in.
What if AI solves fusion and the Moon provides the
helium to make it work? Wind would definitely be a
goner. Both these things would require a huge grid
upgrade of course, but would certainly be kinder
to the grid than the intermittent renewables we are
currently having to manage.
Back to today. Abundant, steady and cheap energy
beamed from space might not be too far in the future,
but it is in the future. Before that, if we want to move
away from fossil fuels, and assuming we don’t agree
that gas will do the transition job, we do need a way
to produce reliable electricity. Enter nuclear, which
is safe, cheap, emissions-free (after hydro it is the
cleanest greenest energy there is) and now recognised
by pretty much everyone, including energy extremist
Greta Thunberg, as the only good answer to the
energy dilemma.
The International Energy Agency (IEA) estimates
that for us to have any hope of reaching net-zero,
nuclear capacity needs to at least double by mid-
century (we are assuming no movement on energy
from space). That nuclear power is generally a good
thing in a carbon-concerned world is hardly a new
insight. However, the more doubt is cast over the other
net-zero solutions (and wind in particular) the more
attention it will garner.
That may go some way to explaining the sharp
rise in the uranium price (up by 125% since the end
of 2020) and the share prices of the likes of Cameco
(Toronto: CCO), up 83% year-to-date, and the Global
X Uranium ETF (LSE: URNG), up 30%. Norris,
whose VT Argonaut Absolute Return fund has gained
80% over five years and has shown first-quartile
performance over one, three, five and ten years, has
been shorting wind and solar shares. Now he is buying
uranium producers Cameco and Kazatomprom (LSE:
KAP). Should you follow? Maybe. As Norris told
Bloomberg: one day governments will wake up to
the “uselessness” of intermittent weather-dependent
power. Then, they will all go nuclear.
moneyweek.com
26 Analysis
Britain faces a
building blockage
Our infrastructure costs us too much, to the detriment of
overall productivity and growth, says David C. Stevenson
When it comes to railway fiascos, massive
overspending and costs spiralling out of control, we
tend to think instantly of HS2. But arguably the bigger
fiasco is our national inability to electrify our existing
rail network properly. Only 38% of our railway
network is electrified, a long way behind France at
55%, Germany at 61%, Spain at 64%, and Italy at
71%. The Swiss have reached 100%.
Electrified railways are a good idea for many
reasons, but one stands out. If Britain is to get its
railways to net-zero by 2050, it will need to
electrify more than 13,000km of track, equivalent
to almost 500km of track every year for the next
27 years. According to Ben Hopkinson of Britain
Remade, a campaign group promoting economic
growth, last year we managed just 2.2km. “In fact,”
he says, “in the last 35 years we have only managed
to electrify enough track in a year to meet the
2050 goal once.”
One ambitious project stands out as an utter
disaster, rivalling HS2 for its cost overruns –
electrifying the TransPennine line. According to
Hopkinson it was originally due to cost £289m
to electrify 76 miles of railway between York and
Manchester via Leeds by 2019. The cost of the project,
now integrated into the Northern Powerhouse Rail
project, has now increased to £10bn.
Underperforming other developed countries
Our public infrastructure, whether energy
infrastructure such as new power lines or transport
infrastructure ranging from trams and roads to
rail electrification, is notoriously expensive, and
getting pricier by the year. Hopkinson’s project on
electrification was based on a database of 242 road,
rail, and tram projects over many decades. Almost
without exception Britain’s costs are around two-and-
a-half times greater than our nearest peer’s.
Hopkinson’s work has pointed to underground
projects in Spain costing a fraction of our equivalents
such as London’s Crossrail (the Elizabeth Line) or the
electrification of the Great Western line, which has
cost 2.5 times more than the equivalent in Denmark.
Cost inflation isn’t unique to the UK and public
infrastructure, of course. Nuclear power, for instance,
has suffered from huge cost overruns in countries as
varied as Finland and France. But the UK does seem
to be the leader across the full range of projects and
systems when it comes to overruns and underfunding.
Britain Remade echoes the points made by a
multitude of economists and policy wonks, namely
“New energy that public infrastructure, be it energy-based or
infrastructure transport, is key to growth and productivity. Two
factors stand out. The first is a direct one. UK energy
is bogged – not uniquely – is expensive, and it acts as major cost
down in burden to UK industry and consumers.
That expensive energy could be mitigated by
endless cheaper and newer energy sources that will be essential
judicial for the massive electrification required to hit net-zero.
But instead, every new piece of energy infrastructure is
reviews and bogged down in endless judicial reviews and appeals.
appeals” The second major stumbling block is more specific to
17 November 2023
©Alamy
Electrifying the TransPennine line has proved a fiasco
transport infrastructure. There is copious economic
literature suggesting that the UK doesn’t benefit
enough from what are called agglomeration effects.
Put simply, successful cities grow bigger, and as that
flywheel of growth kicks in and the city becomes
denser, productivity increases. The virtuous circle of
productivity gains produces ever more growth.
In the UK we have a very uneven distribution of
city-based growth. London dominates the national
economy but we have contained London within
extensive green belts and objected constantly to
densification within the inner areas. As a result,
London has been held back. But what makes this
all worse is that study after study has shown that
our second-order cities – Birmingham, Manchester,
Leeds, Newcastle – are nowhere near as productive or
expansive as their continental counterparts.
Uneven urban growth
That brings us back to transport infrastructure
and Britain Remade research. Because budgets for
transport infrastructure are tight, a disproportionate
share goes to London, missing out the second-
order cities. Rail electrification is just one of many
competing forms of transport infrastructures that
could help boost regional productivity. Research has
shown that in Birmingham, for instance, faster buses,
using even more dedicated bus lanes for express routes,
could greatly reduce commuting times and boost the
available pool of labour in the inner centre.
Trams are another example. There are less
than 30 legacy and modern tram-based networks
in the UK, compared with many dozens, even
hundreds, in European and Asian peers. And trams
are an interesting example, as they fix transport
infrastructure in places permanently, unlike bus stops,
which can be moved. Research has suggested that
permanent tram stops add real value in terms of house-
price boosts to adjacent areas: the sheer permanence of
the infrastructure bolsters localities, improves capital
values and helps local labour forces.
What, then, is to be done? Britain Remade echoes
many academic researchers by making a number of
moneyweek.com

simple, though controversial, suggestions. The first is
that we need to restart a debate shut down a few years
ago when the government binned a plan to allow a
zoning-based approach to housing new builds. Central
to this idea is that we need a new, bolder approach to
what could be called spatial development planning.
The idea is that whole areas should be zoned for
development, which would be promoted through
speedier permissions, no judicial reviews and an
encouragement for development.
moneyweek.com
Analysis 27
The key point here is that the current judicial “How many
review system is being overused and is slowing all
new infrastructure down – it needs to be rethought. A
transport
spatial, zoned approach with automatic presumption or energy
of development would be an important first step.
There also needs to be a drastic rethink of the national
ministers
planning frameworks with a new presumption to have there
accelerate the roll-out of infrastructure. Consultation
is a great idea, but it is being badly abused.
been in recent
decades?”
Lesson from the telecoms sector
Beyond these simple changes we need a deeper cultural
shift to overturn a short-termist approach to decision
making. The cheap point to make in this context is to
count how many transport or energy ministers there
have been in recent decades. But the real challenge is
more complex. The Treasury’s obsession with distinct,
competitive pots of spending is counterproductive.
The pot approach encourages stop-starts, with
projects accelerated and then abruptly shut down – as
has happened so often with rail electrification. Ben
Hopkinson at Britain Remade notes that every time
a rail electrification project is ramped up and then
stopped, we lose skills and a whole ecosystem of
manufacturers, service providers and specialists – and
costs increase.
In many, if not most other countries, a constant
stream of projects is promised and delivered, bringing
down costs and improving outputs. To understand
this point, consider the hitherto successful roll-out of
fibre broadband, led by BT alongside a host of smaller,
locally specific network providers. The commitment
here by BT to spend countless billions over many years
has worked successfully, gearing up a huge ecosystem
of developers and experts.
If we want an improved outlook for long-term
growth and productivity, we need more public
infrastructure at a cheaper price, delivered more
consistently. We know the problem and we are
beginning to understand the fixes. But does society
really have the will to deliver?
17 November 2023
28 Analysis
Britain’s manufacturers
are on the march
Several industries have collapsed over the past few decades. But we still boast global leaders in
specialist areas, says David J. Stevenson. Buying some now could pay long-term dividends
We’re constantly being told about the UK’s industrial
decline. Britain’s manufacturing base constitutes
just 18% of UK GDP, according to the Statista
database. Coal mining, shipbuilding, steelworks,
foundries… they’ve all either shrunk dramatically or
evaporated completely.
Why? Reasons include the end of empire, political
incompetence, bad management and militant trade
unionism. Long memories will recall the notorious
communist convenor Derek “Red Robbo” Robinson.
During a 30-month period in the late 1970s, he led 523
strikes at British Leyland’s Birmingham car plant, notes
the BBC, costing the group around £200m of output.
More recently, some have blamed Brexit. But the
real damage to our manufacturing base occurred
long before the UK’s 2020 exit from the EU. Yet
governmental failure to establish a cogent post-Brexit
industrial strategy isn’t helping British manufacturers.
Indeed, while the UK is still a top producer of
weapons and pharmaceutical products, it would be
very easy to write off the rest of the country’s industry.
Many investors clearly have. The FTSE 100 index is just
10% higher than its dotcom bubble peak of late 1999.
America’s S&P 500 index has almost tripled since then.
Our car industry is roaring
However, this isn’t the full picture. For example, the UK
car industry has been considered “doomed” in recent
years, says the Spectator’s Ross Clark. “First we lost
our native manufacturers. Then, post Brexit, overseas
manufacturers like Honda started to close their UK
factories. Finally came the farce of BritishVolt – the
Tyneside factory that was going to transform the UK
car industry by pumping out batteries, but collapsed
before a spade could be put into the ground.”
In fact, as Clark notes, “the above narrative has
become so engrained that it comes as a shock when a
set of figures emerges to contradict it”. The Society of
Motor Manufacturers and Traders (SMMT) produces
monthly output data for the UK’s car industry. In
the first nine months of 2023, car manufacturing
increased by 14.9% to 659,901 units compared with
the equivalent period in 2022. Export volumes rose by
more than 16%, resulting in 80% of UK car production
being destined for outside the country.
Furthermore, “Britain has discovered a new niche in
light commercial vehicles”, continues Clark, “a much
“The UK smaller market, but a growing one. Restrictions on
specialises private cars in cities are likely to damage passenger-car
sales, but light commercial vehicles are on the ascendant
in light as online shopping expands the market for deliveries.”
commercial Indeed, 2023’s first nine months have seen an 11%
year-on-year rise in this sector, with 62% of production
vehicles, exported: a positive and promising trend.
which are Meanwhile, despite its various troubles, the UK
is still the ninth-largest global manufacturer overall,
profiting according to the manufacturers’ association Make
from the rise UK. There’s an interesting stockmarket parallel, as
well. In contrast to the FTSE 100, the lesser-known
of online and reported FTSE 250 index, which comprises the
shopping” next 250 UK quoted companies, including a similar
17 November 2023
percentage of manufacturers, has almost matched the
21st-century performance of the S&P. In the process, it
has significantly outperformed Germany’s DAX index.
In other words, there have been many British
manufacturing success stories since the dotcom boom
(and bust), although many people may be largely
unaware of them. Some of these operate in the sectors
where the UK’s earlier dominant involvement seemed to
have become extinct.
Over the past two years, though, even the FTSE 250
index has been disappointing, falling by 25% over that
period. For new investors, however, adverse sentiment
is welcome as it provides opportunities. Today we
highlight three companies in this index that are world
leaders in their specialist areas, but whose stock prices
have fallen back enough to make them very interesting
long-term investments.
Bodycote (LSE: BOY), with a market value of
£1.1bn, is the world’s top provider of thermal processing
services. These encompass heat-treatment techniques
and specialist technologies that improve the properties
of metals and alloys, extending the life of components.
In aerospace, Bodycote treats engine components
and landing gear for commercial, business and
military aircraft. It also operates in the automotive
sector, while its general industrial division works with
sectors including industrial machinery, agricultural
equipment, power generation, wind turbine, oil and gas
components, and medical equipment.
There are significant barriers to entry in most of its
markets: potential rivals would find it very difficult to
find their feet and mount a challenge. Last year North
America comprised 37% of sales, western Europe 51%
(less than 10% of the overall total derived from the UK)
and emerging markets 12%. While Bodycote was hit by
Covid in 2020, profits are now recovering.
In the six months to 30 June 2023, revenue was
up 14% in constant-currency terms to £420m, and
operating profit improved by 24% to £63m. The
operating margin rose to 15%. Net debt more than
halved to £26.6m while the interim dividend was hiked
by 5% .“We continue to manage inflationary cost
pressures well through energy surcharges and price
increases,” says Bodycote. It is “on track to achieve a
margin in excess of 20% over the medium term”.
Earnings estimates put Bodycote on a 2023 price/
earnings (p/e) ratio of 12.2, dropping to just above
11 for next year, with a 3.7% yield. That’s a very
reasonable valuation for a world-leading UK operator
with a strong balance sheet. It is a long-term buy.
A world leader in a key field
Renishaw (LSE: RSW), with a £2.2bn market
capitalisation, is one of the world’s leading engineering
and scientific technology companies, specialising in
precision measurement and healthcare. It’s also a world
leader in additive manufacturing, or 3D printing as it is
popularly known – it designs and produces industrial
machines that create parts from metal powder.
The company operates in three regions: the
Americas, Emea (Europe, the Middle East and
moneyweek.com
©Renishaw
Investors can profit from precision-measurement specialist Renishaw
Africa) and Apac (Asia-Pacific). Most of the research
and development (R&D) and manufacturing takes
place in the UK, though other major manufacturing
sites operate in Ireland and India. Renishaw has two
operating segments: manufacturing technologies, and
analytical instruments and medical devices. Only about
5% of sales stem from the UK.
Profitability cratered in 2020 when the pandemic
struck. Though sales and earnings then recovered, the
stock price has dropped by 53% over the past three
years amid slower sales growth (capital investment
in the key semiconductor market has declined) and
inflationary wage increases.
This trend has continued in the three months to
30 September 2023 with revenues dipping by 9% to
£164.5m. Adjusted profit before tax was £28m, down
from £40m the year before. However, the balance sheet
still boasts net cash and cash equivalents of £206.7m.
And the company continues to see positive investment
trends in robotics, defence, low-emission transportation
and additive manufacturing.
Earnings estimates put Renishaw on a current-year
p/e of about 18, falling to 16.4 next year. So despite the
stock’s recent derating it still isn’t ultra-cheap. However,
the firm operates in expanding markets. With eventual
earnings growth prospects backed by a rock-solid
balance sheet, the shares are another long-term buy.
Making money in molten metal
Vesuvius (LSE: VSVS), with a £1.1bn market cap, is
a global leader in molten metal-flow engineering and
technology. With 55 production sites in 40 countries it
provides a range of services and systems to its customers
in the steel and foundry industries worldwide.
The primary demand driver for the company’s
flow control division, as well as its sensors and probes
division, is steel output volumes, while the growing
trend for high-technology steel enables Vesuvius to
achieve above-market growth. In the foundry segment,
the company’s main customers are both ferrous and
non-ferrous operations that produce everything from
moneyweek.com
Analysis 29
large bespoke castings to high-volume automotive “Sterling
items. In 2022, 36% of sales came from Emea, 28%
from Asia and 27% from North America. Just 3% of looks set to
overall turnover came from the UK. Sales and profits remain weak
slowed during 2020 and 2021, but last year saw
recoveries in both. The share price, however, is down and keep
by 35% over the past five years, partly in anticipation of providing
current year profitability pressures.
In the six months to 30 June 2023, group trading a tailwind
profit fell by 18% compared with 2022’s first half but for British
improved against last year’s second half, while earnings
per share dropped by 23%. However, the dividend was exporters”
hiked by 5% “reflecting confidence in the long-term
prospects for the business”.
The group exceeded expectations in the first half of
2023 thanks in particular to “a very resilient pricing
performance”, which it expects to continue. It says
it feels “confident to modestly increase our full-year
expectations”. Vesuvius is on a current-year p/e of nine,
dropping to just above eight next year, with a 5.5%
yield. With its shares out of favour with investors, the
current weakness is a good chance to snap them up.
The days of Britannia ruling the manufacturing
waves are over, never to return. Yet the country’s
engineering tradition lives on within specialist niches.
And there’s another benefit if the country is making
fewer things. If this means a larger long-term trade
deficit, sterling is likely to continue depreciating to help
balance Britain’s books.
A lower pound enhances overseas exporters’
sales and profits. You will note that all three of our
recommendations generate the vast majority of their
revenues from outside this country. Bodycote, Renishaw
and Vesuvius are all excellent examples of British
businesses with global leadership qualities.
While their stock prices are well below their highs,
they operate in expanding markets that provide scope
for long-run earnings growth. Though they’re not
necessarily suitable shares for shorter-term traders, in
a few years’ time they could prove to have been very
shrewd investments.
17 November 2023
30 Personal finance

Maximise your
energy efficiency
Fixed deals are returning, but they might not suit
your household. Here are some alternatives
go up in January, you’ll be
Ruth Jackson-Kirby better off. Alternatively, Utility
Money columnist Warehouse’s Fixed Saver 9 is
set at 1% less for the next 12

W inter has arrived. So as

your heating comes on,
it’s time to think about your
energy bills. After the eye-
watering bills of last winter,
is now the time to fix – or
should you focus on cutting
months. However, to get this
deal you have to take at least
two other services with Utility
Warehouse such as broadband,
mobile or insurance.
Another option is to go
with a cheaper deal that isn’t

your energy use to reduce
your payments?
When the energy crisis
began, energy deals with
fixed-price tariffs disappeared
from the market. Now they
are slowly returning. But don’t
assume fixing your energy
bills will automatically leave
you better off. If you are not
on a fixed deal, how much you
pay depends on the energy-
price cap. This dropped by
7% in October to £1,834 for
the typical household paying
by direct debit. However,
it is expected to rise again
in January by about 4.9%,
according to energy research
group Cornwall Insight.
The upshot is that if you
are hunting for a fixed deal, it
needs to cost no more than 3%
above the current price cap for
you to save money over winter,
says MoneySavingExpert.com.
There are two fixed deals
that may be worth considering.
E.ON Next is offering a fix for
12 months at 3% more than the
current price cap. So, if prices
©Getty Images
fixed. For example, if you are
an existing E.ON customer
you can move onto their Next
Pledge variable tariff. This
offers a fixed discount of £50
off the price cap for the next
12 months.
Smart meters required
Octopus Energy has two deals
that are worth looking at if you
have a smart meter. Its Octopus
Tracker is variable, with the
price you pay changing daily.
The cost is based on the latest
wholesale prices and has been
cheaper than the price cap in
recent months.
If you can be flexible over
when you use your electricity,
then the Agile Octopus tariff
could also be attractive. Again,
you need a smart meter for this
deal, and it isn’t fixed. Instead,
the price you are charged
for electricity changes every
30 minutes.
The price is based on the
forecast for wholesale prices.
This is affected by how much
electricity is being used: when
Heated debate: to fix or not to fix?
more is being generated than
consumed, prices fall. So if
you can shift your electricity
use to off-peak times, such as
overnight, this deal could save
you money.
Agile Octopus could be a
good option if you have an
electric vehicle you can charge
overnight. With a Pod Point
you can use the app to set when
it charges your vehicle. It can
also be helpful if you can delay
starting your dishwasher or
washing machine until the early
hours of the morning when
electricity prices dip.
Customers are told the day
before what the rate will be for
the next 24 hours. “The idea is
that customers then shift their
use accordingly, and at times of
very high prices they massively
reduce their consumption,”
says Miles Brignall in The
Guardian. However, when
the grid has excess power –
at very quiet times – Agile
customers are paid a small
amount for every unit of power
they consume.
This last happened in
July, when customers were
paid 20p for every kilowatt
(kWh) of electricity they used.
That’s when it is time to get
the washing machine, tumble
dryer, dishwasher on and
charge every device you own.
“So far, more than 10,000
households have signed up to…
Octopus Energy’s Agile,” says
Brignall. Many say “they have
been able to cut their electricity
bills by as much as 30%”.
In December 100Green is
also launching a Tide tariff
that will offer different prices
depending on the time of day.
It is expected to be the first of
many such deals. These are
best avoided, however, if you
use the bulk of your power at
peak times – 4pm to 7pm – as
you will pay a premium for
electricity used at those times.

Pocket money... look out for Black Friday fraudsters

l There is a particularly strong case in this
tax year for getting your tax return in
before January. “Surging interest rates
have pulled 1.2 million extra people into
the tax net this year because of higher
earnings brought on by better savings
deals – and more are being dragged into
higher tax bands due to wages inflating
past frozen thresholds,” says Noah
Eastwood in The Telegraph. Hundreds of
thousands of people will be filling in tax
returns for the first time. But HMRC isn’t
equipped to deal with all the likely extra
phone calls, warn experts. So get going
now in case you need help from HMRC.
l Shoppers beware. Black Friday is
approaching, and in the run-up to 24
November fraudsters will be out in force.
Scammers will try to cheat people “out of
big-ticket purchases averaging £900”, says
Toby Walne in The Mail on Sunday. Fake
websites are one of the most popular
scams ,“with ‘too-good-to-be-true’ levels
of discount and ‘limited availability’
encouraging shoppers to panic buy
without thinking through the transaction”.
Check websites thoroughly. Are there
grammatical errors? Can you pay by credit
card? Scammers often try to get you to pay
by bank transfer.
l Interest rates on savings accounts have
stopped rising. To maximise your return,
make sure your emergency pot is getting
the best possible rate. This account should
contain between three and six months’
wages so you can easily pay for
unexpected expenses. You can get a 5.22%
interest rate from Metro Bank’s Instant
Access Savings Account. Next, consider
what you can lock away for the longer
term. You can currently earn 5.91% on
Metro Bank’s one-year fixed-term account,
while the best rate on a five-year fix is 5.6%
with JN Bank. So, put any money you
won’t need for 12 months into a one-year
bond. Don’t ignore the longer-term bonds,
though. “With bond rates falling, the deals
available now could be the best for years,”
says George Nixon in The Times.
And don’t forget the taxman. If you are
likely to exceed your personal savings
allowance (£1,000 a year for basic-rate
taxpayers and £500 for higher-rate) then a
fixed-rate Isa should appeal. That way, all
the growth will be yours. You can get 5%
from Melton Building Society on its five-
year Isa or 5.15% on Gatehouse Bank’s
Easy Access Isa.

17 November 2023 moneyweek.com

 Small business 31

How to hire an apprentice Time to embrace

software-as-a-service
Has your business embraced
Some firms are put off by the bureaucracy, but it is worth persevering the software-as-a-service
(SaaS) revolution yet?
Research suggests that
David Prosser 53% of businesses in the
Business columnist UK now rely on SaaS
solutions, with 80% expected
to move to this approach by
Small businesses struggling to 2025. For small businesses,
navigate the UK’s apprenticeship the benefits could be
system are failing to hire particularly significant.
trainees. The Department for SaaS is a model where
Education reveals that the you buy software and
number of apprenticeship starts other technology services
at organisations outside the on a pay-as-you-go
Apprenticeship Levy regime – at basis, accessing what you
need through cloud
the UK’s smallest employers,
computing, rather than
in other words – fell by more buying packages and
than 13% over the 2022-2023

financial year. That is likely
to reflect frustration at the
bureaucracy in the system, with
groups such as the Association
of Employment and Learning
Providers repeatedly warning
that small employers are put off
by red tape.
An array of benefits
If so, that’s unfortunate.
Research shows businesses
that take on apprentices reap
a number of benefits. For
example, more than nine in ten
trainees stay on at the employer
after their apprenticeship is
completed, saving firms money
on hiring and onboarding
fees. Eight in ten employers
with apprentices say their
programmes have improved
skills in the business. Seven in
ten say apprentices have helped
them improve productivity.
The good news is that the
government has tried to cut
the administrative burden
faced by small firms when
hiring apprentices, with new
systems recently announced
to streamline the process.
Funding is also available, which
can greatly reduce costs. The
The state will cover 95% of the cost of an apprenticeship
for firms with an annual wage bill of less than £3m
In the UK, the majority of
apprenticeships are now funded
through the Apprenticeship
Levy, a percentage of earnings
that employers must set aside
each year for this purpose.
However, small businesses
with an annual wage bill of less
than £3m are exempt from this
levy. Instead, they are covered
by a co-investment model for
apprenticeship funding.
This model requires the
state to cover at least 95% of
an apprenticeship’s costs, with
the employer only expected to
contribute 5%. In some cases,
apprenticeships may even be
fully funded. Small employers
taking on the youngest
apprentices, for example, can
receive 100% of their costs.
Remember, however, that
this funding is to cover the
cost of apprenticeship training
and assessment. Employers
remain responsible for paying
apprentices’ wages – at least the
national minimum wage – as
well as for funding benefits
©Getty Images
installing them on your
on-premise computer
systems. This can be a more
affordable way to keep your
such as sick pay and holidays. technology up-to-date, with
Once businesses are ready no need to make large one-
to hire an apprentice, they off investments.
Other advantages
do so by creating an online
include the fact that your
apprenticeship services account. software provider will be
This is the channel through responsible for setting up
which they advertise roles, and maintaining your apps,
but also where they manage potentially reducing your
payments to training providers ongoing IT costs. SaaS
and secure government can also ensure your staff
funding. Each apprentice hired have access to software
should have their own training wherever they happen to
be working, that your
plan, setting out the learning
business is in a position to
opportunities they can expect. store as much data as it
If the system sounds needs to, and that you can
daunting, there is plenty of help access the latest security
available. The government- and governance standards.
backed National Apprenticeship That said, the SaaS
Service, for example, provides approach does need to
a range of support for smaller be managed carefully.
businesses keen to take on Some companies report that
adding hundreds of different
an apprentice for the first
applications has led to
time. It can guide you to the unexpected cost and
apprenticeship framework complexity. Make sure you’re
most suitable for your industry on top of how SaaS is being
and provide details of training deployed in your
providers that offer the right organisation, and monitor
type of education. The service usage to ensure you’re only
also provides advice on where to paying for software that
access funding. you’re actually using.

Petty cash... VCTs in funding frenzy

first step for any small firms
contemplating apprenticeships
is to identify an accredited
training provider to work
with. The government publishes
details of these groups. They
provide your apprentice with
“off the job” learning, which
must account for at least 20% of
their working time. That
education can be provided face-
to-face or online.
At this stage, small firms
will also be able to identify the
required qualification levels for
different apprenticeship schemes
and, crucially, to investigate the
funding potentially available.
l Venture-capital trusts (VCTs) that have raised
almost £3bn of new funding over the past three
years are now looking for small businesses in
which to invest the money. Experts say VCTs are
increasingly competing for the best funding
opportunities. There are strict rules that require
them to deploy capital raised within a fixed
timetable in order to retain the tax advantages
they offer investors. The VCT rules allow funds
to invest in business that are up to seven years
old, and to invest as much as £5m in each
business in any one tax year.
l Sole traders and small businesses thinking
about their end-of-year tax returns and accounts
need to consider whether they are affected by
reforms to the base period rules, accountants
warn. The reforms, which come into effect for
the 2023-2024 financial year, will potentially
have an impact on any business that does not
have an accounting year-end of 5 April or 31
March, and could oblige you to pay tax on more
than 12 months’ profit. Take professional advice
if you’re unsure about the new regime.
l Are you planning to take advantage of Small
Business Saturday? The annual initiative
is designed to encourage consumers to
support small businesses – both local shops
or traders, and online enterprises. This year’s
event takes place on 2 December. The website,
smallbusinesssaturdayuk.com, is full of advice
and tips on how to promote your business for
the event.

moneyweek.com 17 November 2023

32 Personal view

Seek out the best of British large and

small stocks to counter global jitters
A professional investor tells us where he’d put his money. This week: Gervais
Williams, fund manager, The Diverse Income Trust, selects three favourites
Since 1955, quoted British smaller companies (small
caps) have massively outperformed their large-cap
counterparts, even through very unsettled economic
conditions – maybe especially through unsettled
economic conditions. During globalisation, UK
small caps outperformed UK large caps, as expected.
But no one cared. Why? Because nearly everything
outperformed UK large caps – especially US technology
stocks, whose returns were boosted by ever lower
interest rates.
But now everything has changed. Inflation and
geopolitical tensions have emerged, while the prospect
of global recession is also rattling markets. In these
circumstances, companies paying appealing and
growing dividends have all the advantages. Over the
last three years, as the globalisation trend has faded,
UK large caps have outperformed. They have outrun
America’s technology-heavy Nasdaq market as well as
Japan’s equity market recovery.
For now, the UK’s new trajectory remains
overlooked. Sales out of UK funds are close to record
levels, although international buyers are more than Galliford Try specialises in building
offsetting this for UK large caps. But overseas investors

are not interested in UK small caps. So there is ample
scope for UK small cap outperformance in future.
For these reasons our trust includes a mix of
smaller income-paying companies alongside some of
the large income payers. When dividends are under
pressure, a broader investment universe helps. This
diversification also enhances the scope to generate
better dividend growth.
Take Galliford Try (LSE: GFRD), for example.
It’s a market leader in building infrastructure.
Expenditure on water infrastructure in particular is
rising rapidly. And yet the company’s net cash balance
almost matches its market capitalisation. It is growing
its ordinary dividend each year. And this year, after
“If history is settling a contractual dispute, the firm is making a
any guide, special dividend payment to shareholders on top, so the
stock yields 8.7%.
we could be
on the verge Bolstering liquidity in bond markets
During unsettled periods, it can become harder than
of a UK usual to sell stocks, and methods that enable institutions
small-cap such as pension schemes to trade them often become
more valuable. TP ICAP Group (LSE: TCAP), a global
supercycle” leader in financial-market infrastructure, acquired
©Alamy
infrastructure for the water sector
Liquidnet, a platform that helps institutions trade large
blocks of stock with each other, in 2021. TP ICAP is
now rolling this out over the bond markets, where it can
be more difficult to buy and sell than in equity markets.
In our view, this could be good news for TP ICAP. The
shares yield 7.5%.
Bear in mind that sentiment can change dramatically.
Ahead of the global pandemic, for example, UK small
caps underperformed. But from March 2020 onwards,
they soared. So small caps can always suddenly rocket.
Enter Yu Group (Aim: YU), the business utility supplier.
Its share price has already risen more than 12-fold over
the last three years. But in our view, it could now gain
substantial market share in supplying companies with
electricity, gas and water. The company has recently
started to pay dividends.
As the new macroeconomic trends favour income-
paying companies such as those in the UK, we expect
the UK stockmarket outperformance not only to
continue, but also to accelerate. And if UK small caps
outperform as they have in the past, then they could
outpace the returns of many overseas markets. Get
ready for a potential UK small-cap supercycle.
©The Telegraph 2023

17 November 2023 moneyweek.com

34 Profile

The underdog shaking up tech

Dating app Bumble is seeking a reversal of fortunes by taking on Lidiane Jones, a well-regarded leader
in tech, as its new boss. Can she work her magic in a new arena? Jane Lewis reports
For an industry supposedly “devoted to
facilitating love and partnership”, the
history of the matchmaking sector is full
of “strife and division”, says the Financial
Times. One woman hoping to change
that, or at least turn it to her advantage, is
Lidiane Jones – the fast-rising, Brazilian-
born tech executive, who has just jilted
Slack after less than a year in charge to
join the female-forward dating site, Bumble.
Jones, 44, arrives with glowing
testimonials that wouldn’t look out of
place on a dating profile. Last year, as
Fast Company notes, she was effusively
described by Slack’s co-founder and guiding
light, Stewart Butterfield, as “pragmatic
and caring, insightful, passionate, creative,
kind and curious”, as well as hardworking
and collaborative. Just the person, one
might think, to turn the tide for Bumble,
which has lost roughly 80% of its value
since its 2021 initial public offering (IPO).
But investors aren’t yet sold, says The Wall
Street Journal – collectively “swiping left”
by sending shares to an all-time low when
her appointment was announced.
“She shouldn’t take it too personally.”
Some of the reaction could be “founder
infatuation”. Bumble has hardly thrived as
a public company, but CEO Whitney Wolfe
Herd – who started the firm in 2014 and
was previously a co-founder of Tinder – still
commands respect. And, although she’ll
stay on as the company’s executive chair,
investors worry that “the lack of consistent
leadership in the C-suite will make it more
difficult to establish a consistent strategy”.
If Jones has any doubts, she doesn’t show
it, says the FT. Her “underdog” background
has equipped her with a fighting spirit. Born
in São Paulo to a cleaner and a mechanic,
she discovered the “magic” of programming
during free computer classes at school
and won a scholarship to the University of
Michigan to study computer science aged Justin Mateen. Indeed, Jones’ recruitment
18. Barely able to speak English, she was marks “a handover between two rare
so homesick her mother often begged her female leaders in tech”. Both women know
to return. “But I kept thinking – I won the there’s everything to play for. Although
lottery. And I can’t waste the ticket.” Match, whose multiple brands also include
Following an internship at Apple, Jones Hinge and OkCupid, remains the Goliath
joined Microsoft as a software engineer and of the sector, it too been “ghosted” by
stayed for 12 years, working on products investors, notes The Wall Street Journal.
including Excel and Office. She married a The shares are down 40% in a year. The
co-worker and had two children, shifting battle among dating sites now, says Jones,
tack to join the wireless speaker company is about who can bring about “the next
Sonos in 2015 to work on streaming music wave of innovation” by incorporating more
systems. After a four-year stint there, artificial intelligence into their apps. As an
Jones “pivoted back to business software” often underestimated underdog, Jones
by joining Salesforce, “which promoted reckons she has
her repeatedly”, says Fast Company. the advantage.
“I kept thinking – I won
the lottery. And I can’t
waste the ticket”
Nonetheless, she was reportedly surprised
to be offered the role of CEO at Slack in late
2022, 18 months after Salesforce acquired
the messaging business app in a $28bn deal.
The job of integrating two such distinctly
different companies was never going to
be easy – particularly in the teeth of a tech
downturn and multiple lay-offs. For many
at Slack, Jones remained “an intriguing
but somewhat mysterious figure”, says
TechCrunch. Still, Butterfield reckons her
record there will stand her in good stead at
Bumble. She arrived during “a perfect storm
of anxiety among employees” and was able
to provide the
equanimity
and stability
people needed.
Bumble itself is no
stranger to disharmony, having
been founded by Wolfe Herd following a
big fallout with her former Tinder partner,

Miss Universe goes woke – then broke

“I knew from the age of
five that I was born in
the wrong body,”
Anne Jakapong
Jakrajutatip told
Cosmopolitan’s
Hannah Chub last
month. Jakrajutatip
(pictured) grew up
as a boy named
Andrew in a traditional
family in Thailand, and
undertook multiple surgeries
and hormone therapies after
turning 35 to “put myself first”.
But even as a boy,
“womanhood meant (and still
delegates represented swimsuits with a longing for be there, but eliminations would
everything I wanted to world peace, but about “female no longer take place during that
be: a strong, powerful empowerment”. round – “we’re taking small
woman of the world.” The 72nd competition in El steps away from the male gaze”.
In fact, she loved Salvador would be open to “all More changes were to come.
it so much she women between the ages of 18 “If there’s anything I’ve
bought the and 28, including those who learned in my 44 years, it’s that
company. In were previously excluded, like change is good. Change can
October 2022 , the women with children and those make life more beautiful.”
JKN Global Group she who are pregnant, married or Change that Jakrajutatip
founded in 2013, and divorced”. At least two trans hadn’t banked on arrived last
which made its money from a women would also feature for week when JKN Global filed for
mix of drinks, cosmetics, health the first time. bankruptcy, having missed a
products and media rights, Among the contestants bond repayment deadline of
acquired the formerly Donald would be “CEOs, scientists, around $12m, reports the BBC.
Trump-owned brands of Miss politicians, you name it”. The The group said it would seek to
Universe, Miss USA and Miss competition would also be led restructure its debt to resolve a
©Alamy; Getty Images

does mean) so much to me… Teen USA, for $20m. by an “all female leadership “liquidity problem”, and would
When I’d sit down to watch the Jakrajutatip had big plans for team” and all the hosts and continue operating. In the past
Miss Universe competitions the beauty contest – no longer judges would be women, too. year, the group’s share price has
with my sister and mother, the would it be all about models in The swimsuit parade would still fallen by more than 80%.

17 November 2023 moneyweek.com

36
Take a walk
on the
wild side
Explore nature in
all its diversity
in South America
An oasis of calm
San Pedro de Atacama is “an oasis amid the
Atacama Desert of northern Chile”, says
Mark Johanson for Bloomberg Pursuits.
Here, visitors will find “glittering salt flats,
sky-poking volcanoes, teal lagoons painted
pink with flamingos” and the resort town’s
most recent hotel opening – the 51-room
Our Habitas Atacama, which opened in
September. The hotel makes a virtue out
of allowing guests to explore the desert by
themselves, whether on horseback or by
quad bike, and it is well worth it. “By night,
the Atacama sky – studied by astronomers
the world over due to its almost complete
lack of cloud cover, moisture or light
pollution – offers a priceless spectacle.”
The hotel has been designed so that
guests feel like they are “entering a
traditional Atacama home”. The thick clay
walls are made of “temperature-controlling
adobe” and the grass roofs are lined in
brea, a native flowering plant, while the
pottery and tapestries have been created
by local indigenous artisans. “A highlight
at the Atacama property is the clay sweat
lodge, or temazcal.” Guests “set forth their
intentions” for the treatment as a trained
local guide “pours herb-infused water atop
fiery volcanic stones, heating the dome-like
lodge with increasing levels of steam. The
idea is to detoxify your body and remove
stress in your mind.” From $300 a night,
ourhabitas.com/atacama
A giant of the savannah
Guyana was known as
British Guiana until it
gained independence
in 1966 and it is,
today, the only
English-speaking,
cricket-playing
country on mainland
South America, says
Simon Barnes in the Daily
Mail. Flying south from the
capital Georgetown, “you see a
lot of green below – unbroken expanses of
rainforest that look like the world’s biggest
collection of broccoli”. Where the north
savannah grassland, swamp and flood
forest meet on the river Rupununi, you
will find Karanambu Lodge – a one-time
family cattle ranch and now a “thrilling
eco-tourism destination”. From here, “we
set out in pursuit of… one of the [world’s]
unlikeliest animals”, the giant anteater.
17 November 2023
Travel
“Sky-poking volcanoes” in Chile’s Atacama Desert
Eventually, one is spotted. It emerged
from a bush with a face “so narrow it was
almost a tube” and a “massive” bushy tail.
“I would cross the world for a wild sight
that lasts a couple of seconds – this anteater
was far more generous than that.”
Later, while taking a “gentle boat ride”
on the Rupununi, “we travelled sweetly on,
past kingfishers and hummingbirds, along
waterways walled and in places roofed
by the dense riverine forest”, says Barnes.
Kaieteur Falls, the world’s tallest single-
drop waterfall, is a must-see along the way.
The nine-day Guyana in Living
Colour tour with Wilderness Explorers
costs from £3,088 per person, see
wilderness-explorers.com
Birding heaven
“Colombia
is birding
heaven,”
says Adam
H. Graham
in The
Wall Street
Journal. Not
only does it
have more bird
species than any
other nation,
at 1,958 and counting, but of those, 80
are only found in this country. Over the
past quarter of a century, Colombia has
swapped its reputation for drug-related
crime for a “thriving environmentally
focused and indigenous-led tourism
industry”. “Birders and biologists have
replaced guerrillas and narcotraffickers” in
the quiet corners of the country. One such
tranquil spot is Barú – a mangrove-fringed
peninsula situated a 25-minute speedboat
ride from the city of Cartagena.
Here, the Sofitel Barú Calablanca
Beach Resort is a “splashy” new hotel and
a good base from which to start looking
for birds. Serious twitchers may scoff, but
Barú’s National Aviary of Colombia, an
18.5-acre refuge for birds caught up in
South America’s illegal animal trade, is a
©Habitas Atacama/Kleinjan Groenewald; Alamy
good place to start. Otherwise, engage in
a spot of “lazy birding”, beginning with
a cocktail from the Sofitel beach bar. “I
[then] walked a coastal mangrove trail in
my flip-flops, where ripples from the lagoon
lapped over white sand [and] spied a roll
call of delightfully named birds,” including
streaked flycatchers, brown-throated
parakeets and bananaquits – “[all] without
even really trying”. From around £400 a
night, sofitelbarucalablanca.com
The elusive maned wolf
“In Brazil, the cerrado is the country’s
vacant heart, a grassland of long horizons
and huge skies,” says Stanley Stewart in
the Financial Times. It is here, in South
America’s second biggest biome after the
Amazon, that the elusive maned wolf lives.
“It is a supermodel of the animal kingdom,
the most beautiful of canids, shy, slender,
fine-boned, with a golden coat and long
legs. It would make a leopard look clumsy.”
But the wolf’s habitat is under threat from
vast tracts of land being turned over to
large-scale agriculture, in particular that of
soyabeans. Conservation efforts focus on
wildlife breeding, small-scale sustainable
ranching and low-impact tourism.
Pousada Trijunção is an “old-fashioned
ranch house” and an “elegant rustic
lodge – all salvaged wood and rich South
American fabrics”. The kitchen produces
“hearty meals” and the small bar has
“excellent” caipirinhas. There is also a
swimming pool, “where you can pass long
afternoons dreaming of wolves”. After
three hours spent tracking a maned wolf,
suddenly there she was, “as
we came round the bend
– trotting across the
track as elegantly as
a ballerina crossing
a stage”. “Then,
she was gone,
the tip of her tail
disappearing into
the long grass.”
Around £575,
niarratravel.com
moneyweek.com
 Toys 37

Viva Riva’s new floating Diva

The new 82’ Diva is a beautiful, multi-layered cake of a yacht. Chris Carter reports
T he new 82’ Diva, from
Italian shipyard Riva (part
of the Ferretti Group), made
its international debut at the
Cannes Yachting Festival in
September, where it showed
off its “revolutionary approach
to the use of space”, says
Katia Damborsky for Boat
International. Outdoor areas
have been maximised and
indoor spaces “thoughtfully
designed according to their
function”. The first boat in
the series was launched in La
Spezia, Liguria, in July.
“The launch of a new Riva
is always a moment to savour”,
and the 82-footer with a 20-foot
beam “does not disappoint”,
says Motor Boat & Yachting
magazine. The styling is
“elegant” and the detailing
“exquisite”, but it is indeed the
layout of the vessel that is so
impressive. For example, rather
than the saloon being all on
one level, a couple of steps takes
you up to an elevated dining
area overlooking the lounge
through a glass balustrade.
And while the helm and galley
are on one level, they can be
shut off from each other with
a glass door when being used
by the crew. There are “quite
a few steps, hard edges and
corners to negotiate but the
result is a greater feeling of
privacy and separation” as well
as a good level of headroom
between decks. The cabins are
“richly furnished with highly
polished wood, steel, glass,
leather and marble”, and all
come with ensuite bathrooms.
Meanwhile, “a large flybridge
with a sheltered and sociable
sunbathing area in front of the
helm position, and an unusually
stylish hard top, add the icing to
this lavish multi-layered cake”.
The beach club at the stern
of the vessel is “sprawling” and
two large bulwarks are able
to swing down to create ten
feet of extra space, says Rachel
Cormack in the Robb Report.
Forward of the beach club lies
the raised cockpit and, below,
the garage is large enough to
accommodate a jet tender and
a Seabob. “In terms of grunt”, enabling a top speed of 31
the yacht can be fitted with a knots and a cruising speed of
pair of Man V-12 1,800 engines 27 knots. All in all, the Riva 82’
for a top speed of 29 knots and Diva is “a beauty”.
a cruising speed of 26 knots,
or two slightly more powerful From £6.6m, excluding taxes,
Man V-12 1,900 engines, visit riva-yacht.com

Wine of the week: a delightful dolcetto

2022 Monterustico, Matthew Jukes
Dogliani, Piemonte, Italy Wine columnist
£23.80, toscanaccio.co.uk
Perhaps it is a stretch of the
imagination to think that one
wine could change the
fortunes of a grape variety
or, indeed, a wine region. I
have known about and
enjoyed many dolcettos
from Dogliani over the
years. Situated in the
province of Cuneo, a
couple of kilometres due
south of Barolo, this
region is synonymous
with this grape variety,
but none have moved
me as much as this one.
The Vajra family, famous for
making an outstanding portfolio
of wines in Barolo, including
those made from the dolcetto
variety, has turned its attention to
the once-famous region of
Dogliani. Only 30 years ago,
these wines were more sought
after than the nebbiolos of
Barolo and Barbaresco, but
times have changed. In
the right hands, the
dolcetto grape can make
sensational red wines; 2021
G.D. Vajra, Coste e Fossati
Dolcetto d’Alba (£23.85,
winedirect.co.uk) is one you
must hunt down, and for an
almost identical price you
can enjoy Monterustico from
the same family, but from terrain
ideally suited to this variety. Here
is a preview note of this wine from
my forthcoming 2023 Piemonte
Report: this new dolcetto is in its
second year, and it is a fabulous
piece of intuitive winemaking.
Bright, clean, seamless, black-
fruit-soaked and bristling with
positive energy, there is a violet
and black cherry top note to this
wine that is superb, and this draws
you in while the whoosh of berries
takes you along on a raft of
buoyant fruit.
Matthew Jukes is a winner of the
International Wine & Spirit
Competition’s Communicator of
the Year (MatthewJukes.com).

moneyweek.com 17 November 2023

38 Property
This week: houses with workshops – from a Grade I-listed former Benedictine priory with two workshops

Adams Cottage, Plaistow, West Sussex. Ravenstone House, Ravenstone,

A period property set in large gardens with a
separate workshop with an office above, and
a timber-clad studio annexe. It has beamed
ceilings, an inglenook fireplace and a breakfast
kitchen with an Aga. 4 beds, 2 baths, 2 receps,
conservatory, stables, stores, 2.99 acres.
£1.65m Jackson-Stops 01730-812357.
Buckinghamshire. A 19th-century Grade II-
listed house with an outbuilding in the garden
that includes two workshops. It has period
fireplaces, a conservatory and a cellar with a
barrel-vaulted ceiling. 7 beds, 4 baths, 2 receps,
2 kitchens, greenhouse, orchard, 2.57 acres.
£2.75m Knight Frank 020-7861 1549.

The Retreat, Balsall

Common, Coventry, West
Midlands. An 1830s house with
a summer house and a large
oak timber workshop with
vaulted ceilings in the garden
that is used as a design studio.
The house has beamed ceilings,
wood floors, a large inglenook
fireplace with the original
bread oven, and a country-
style kitchen overlooking
the garden. 4 beds, 3 baths,
2 receps, study. £900,000
Fine & Country 02476-500015.
17 November 2023 moneyweek.com

in the garden, to a period property with a workshop and office in Plaistow, West Sussex
Plumbland House, Aspatria,
Wigton, Cumbria. A Grade II-listed
1850s house with landscaped gardens
that include the original wash-house,
which is currently used as a workshop.
It has Victorian fireplaces, a reception
hall with a stained-glass window, and a
conservatory leading onto the gardens.
4 beds, 3 baths, 2 receps, sunroom,
2 offices, kitchen, outbuildings,
stabling, paddock. £750,000
Fine & Country 01228-583109.
moneyweek.com
Property 39
Upper Braevallich
Cottage, East
Lochaweside, by
Dalmally, Argyll &
Bute, Scotland. A
period cottage in a
rural area close to Loch
Awe, with gardens that
include a workshop,
polytunnel and fruit
cages. The cottage
has glazed windows,
a multi-fuel stove in
the living room and a
kitchen with window
seats overlooking the
garden. 3 beds, 2 baths,
dressing room, 2 receps,
log store, potting shed,
garage/workshop, 1 acre.
£420,000+ Dawsons
01631-563 901.
Rookery Farm,
Church Street, Silverstone,
Northamptonshire. A
Grade II-listed former
farmhouse on the edge of
a village with a range of
stone outbuildings that
include a workshop. It
has beamed ceilings and
inglenook fireplaces.
5 beds, bath, recep, 2
studies, kitchen, 1-bed
annexe, studio. £1.35m
Savills 01295-228007.
Downton Barton,
Dittisham, Dartmouth, Devon.
A Grade II-listed 17th-century
former farmhouse with 18th-
century alterations. It comes
with two converted barns
housing a workshop/studio,
and a three-bedroom barn
conversion. The house has
flagstone floors and a country
kitchen with an Aga. 5 beds, 3
baths, 3 receps, pond with sun
deck, courtyard, greenhouse,
wildlife meadows, orchard,
paddock, 2 acres. £2.75m
Marchand Petit 01803-839190.
The Priory, Horsham
St. Faith, Norfolk. A Grade
I-listed 12th-century former
Benedictine priory set in
large gardens with a range
of outbuildings that include
two workshops. The house
incorporates elements of
the priory refectory and has
limestone and beamed walls
and 13th-century monastic
wall paintings. 7 beds, 2
baths, 3 receps, library, study,
breakfast kitchen, garden
room, barn, coach house,
stabling, 6.1 acres. £1.33m
Strutt & Parker 01603-617431.
17 November 2023
40 Reviews
Book of the week The odds of his being a Newbie
genius are even smaller By Emma Griffiths
Directed by Neil Sheppeck
Going Infinite Running at The Space, Isle of
The Rise and Fall of a
Dogs, London, till 18 November
New Tycoon
Michael Lewis
Food security, agriculture’s
Allen Lane, £25
impact on the environment and
I n Timon of
Athens by
Shakespeare, a
the impact of automation are all
hot topics at the moment.
Newbie, a play produced by
seemingly rich Rising Tides as part of the Good
person lavishes COP, Bad COP 28 Festival at
gifts on all and The Space in the Isle of Dogs,
sundry until it is a satirical comedy that
turns out that deals with all these themes.
The play is set in a dystopian
he has being doing so with future where the apparent
borrowed money. Unable to

get any more credit, he invites
his friends to a dinner, where,
instead of the expected banquet,
he serves them a dinner of water
and rocks. Recently convicted
fraudster Sam Bankman-Fried
(pictured) may have hated the
Bard – famously, he claimed that
the “odds” of Shakespeare being
a genius were small, basing
his reasoning on population
sizes – but he was a modern-day
Timon, splurging countless
millions in political donations
and gifts, until large sums of
money were discovered missing
from the accounts of FTX, the
crypto brokerage that he ran.
Going Infinite, by Michael
Lewis, tells his story.
The turning point in
Bankman-Fried’s life came at
university, where he became a
fan of the “effective altruism”
(EA) movement. This utilitarian
philosophy argues that the best
way to improve society for most
people isn’t to get a “worthy”
job, but one that earns as much
as possible, which you can then
give away. As Lewis puts it, even
a “mediocre banker” could
earn enough to pay for several
doctors in Africa “and thus
would save several times more
“The irony is that a rebound in crypto
markets means that FTX’s creditors may
get more money back than expected”
lives than any one doctor”. This
led Bankman-Fried to ditch
academia for finance, setting
him on the path to FTX.
Lewis has an established
reputation for books that bring
the world of finance and business
to a mass audience, and his
Moneyball and The Big Short
have been made into successful
films. Going Infinite isn’t quite
up to his usual standard, but
he is effective at putting the
audience right into the action and
highlighting comic moments,
such as the intense backbiting
and infighting that took place
between the supposed “altruists”.
The book suffers from the
abruptness of FTX’s implosion,
which occurred in a matter
of days and took everyone
(including Lewis) by surprise.
Lewis tries to find out where all
the billions still unaccounted
for went, but is forced to give it
©Getty Images
up. Bankman-Fried’s aloof and
cold personality also makes it
hard for either author or reader
to understand the motivation for
his behaviour, though effective
altruism may have helped create
a “means justify the ends”
mentality that led him to bend –
then break – the rules.
The ultimate irony is that,
just as Shakespeare’s Timon
ends up discovering hidden gold,
the rebound in crypto markets,
as well as some early artificial-
intelligence investments, mean
that FTX’s creditors may
ultimately get more of their
money back than originally
expected. Indeed, there is
even talk about relaunching
FTX in some form. Bankman-
Fried now faces a lengthy stay in
jail; his successors may be just
getting started.
Reviewed by
Matthew Partridge
extinction of bees means that
society relies on artificial
pollination by swarms of drones
to enable a sustenance level of
food production.
The play centres on a team of
four drone pilots (played by
Skevy Stylia, Aurea Williamson,
Sebastian Senior and Benedict
Esdale). On his maiden flight,
newbie Jackson (Esdale) loses
contact with his drones while
they are over the skies of
France, only for the subsequent
search to shock everyone by
uncovering an actual living bee.
When this in turn enables the
discovery of a lost underground
colony, it looks like the solution
to food shortages is at hand. It
soon becomes clear that things
aren’t as simple as they seem.
Political plays risk focusing
too much on the message at the
expense of drama. Griffiths’
funny writing, and strong acting
from the ensemble cast, avoids
this trap and keeps the focus on
the action and comedy, only
indirectly referring to real-world
issues. The production team
make good use of props and
video clips (designed by Andy
Straw and with Gabriel
Thomson appearing in multiple
roles) to bring the cosy theatre
space alive in an entertaining
production that delivers an
important moral.

Book in the news… a surprisingly decent take on economic history

Rachel Reeves, has already run into popularising and developing the work of
The Women Who Made controversy for alleged plagiarism. earlier thinkers, such as Joan Robinson
Modern Economics This is a pity because it is a readable book with Keynes and Rosa Luxemburg with
Rachel Reeves that highlights interesting stories that Marx, that they should be regarded as
Basic Books, £20 even those who have studied economics major thinkers in their own right.
Books by politicians are or economic history may be unaware of. The book loses momentum when it
usually either ghostwritten As the title suggests, Reeve’s book reaches the modern day, as the
or poorly written – or both. looks at major female economists and emphasis shifts towards figures such
It is now generally economic thinkers, most of whom have as US Treasury secretary Janet Yellen
acknowledged that John F. been neglected. Some of them were the and European Central Bank head
Kennedy’s Profiles in wives of already famous thinkers, such as Christine Lagarde, who are important
Courage, which won the Beatrice Webb and Mary Paley Marshall, for their roles as decision-makers rather
Pulitzer Prize in 1957 and who were overshadowed by their more than as theorists. The author’s attempts
helped speed him on his famous spouses, even though they made to use the stories as springboards for
road to the presidency, was largely major contributions in their own right. policy pledges also starts to sound a
written by his speechwriter. Boris Anna Schwartz was neglected in favour of little artificial. Still, the earlier parts of the
Johnson’s Churchill biography infamously her long-time collaborator Milton book are informative and her anecdotes
claimed that Germany captured Friedman, leading him to half-joke that she give us a glimpse into the pragmatic left-
Stalingrad. The Women Who Made “did all the work and I got a lot of the of-centre policies she will pursue if she
Modern Economics, by shadow chancellor credit”. Others played such major roles in eventually becomes chancellor.

17 November 2023 moneyweek.com

 Crossword 41
Bridge by Andrew Robson Tim Moorey’s Quick Crossword No. 1182
A bottle of Taylor’s Late Bottled Vintage will be given to
The (not-so) Great Dane the sender of the first correct solution opened on 27 Nov
The Danish expert who erred on this week’s deal will have been 2023. By post: send to MoneyWeek’s Quick Crossword
No.1182, 121-141 Westbourne Terrace, Paddington, London W2 6JR. By email:
kicking himself.
scan or photograph completed solution and coupon and email to: crossword@
Dealer South East-West vulnerable moneyweek.com with MoneyWeek Crossword No.1182 in the subject field.

♠ K75 ?????

♥ 43 ????

♦ 982 ????

Q9842
????
?? ♣ ????
♠ A4 ??? N ???? ♠ 1093
????
♥ Q109762 ???? ♥ J5
???? ????
♦ Q10543 W E ♦ AJ76
????
♣ –
???? S ♣ K753
????

♠ QJ862 ????
♥ AK8
♦K
♣ AJ106
The bidding
South West North East
1♠ 2♥ 2♠ 3♥*
4♠ pass** pass pass

* Marginal given the lack of a third Trump, although vulnerable

Two-Level overcalls tend to contain six cards. Perhaps a
(take-out) double is wiser.
** No question of sacrificing at the unfavourable vulnerability.

West led the two of Hearts, intended as a suit preference signal for a
Across clues are straightforward while down clues are mildly cryptic
Club return. Declarer won East’s Knave with the King and led a low
Trump towards dummy’s King. West grabbed his Ace, switched to a ACROSS
Diamond to East’s Ace, and scored his Club ruff (declarer playing low 1 In addition (4)
on East’s low Club switch). West exited with the Queen of Hearts to 3 Ambitious space
declarer’s Ace and we have reached the crucial point. launch (4,4)
8 A soft sweet made of
At the table, declarer led a low Trump to dummy’s King (West
chocolate mixture (7)
discarding), and soon found out that he could no longer make his
10 Handle (5)
game. For after running the Queen of Clubs, then leading a Club to his 11 First meal of the day? (4,7)
Knave and Ace, he had to ruff his third Heart. Because he had used up 13 Church office for
dummy’s King of Trumps, East was able to overruff. Down one. clergyman (6)
The winning play at trick six is to cash the Queen of Trumps. 15 Programme (6)
Declarer can then ruff his third Heart with the King (no overruff now), 17 Exceptionally good (11)
and run the Queen of Clubs through East. Ten tricks and game made. 20 Czech capital (5)
21 Short sword (7)
For Andrew’s four daily BridgeCasts, go to andrewrobsonbridgecast.com 22 Special marks in
maths (8)
23 Gala (4)
Name
DOWN
1 Man-made object in crate aft at sea (8)
2 A case for brains (5)
4 Some mentioned getting nervous (2,4)
5 What’s shown by Manila? It makes
no difference (7,2,2)
6 Seekin’ a lift in part of North Herts (7)
7 Driver’s aids found in river (4)
9 It could be Parisian cheer –
or cheers! (6,5)
12 Reportedly Soros’s first for generosity (8)
14 Warning to disperse from port
with discretion (4,3)
16 Old Conservative carves up what
goes to the wall (6)
18 Empty potty son’s taken away (5)
19 Card game’s coming up? It’s bridge (4)

Address

Sudoku 1182 email !

To complete MoneyWeek’s
1 4 7 Sudoku, fill in the squares
5 2 7 1 in the grid so that every row
and column and each of the
1 6 8 nine 3x3 squares contain all
the digits from one to nine.
6 1 4 The answer to last week’s
5 9 puzzle is below.
Solutions to 1180
Across 1 Glancing g Lancing 5 Tare homophone tear 8 Actor (f)actor
(y) 9 Mustang must an g 11 Crown prince misleading def 13 One-way
O + anagram of Wayne 14 Angled anagram of Glenda 17 Vindication v
indication 20 Ratings two definitions 21 Indie two definitions 22 Eddy (n)
eddy 23 Stays put guy = stay + tups reversed. Down 1 Gear 2 Article
3 Corporation 4 Naming 6 Again 7 Eggheads 10 Serendipity 12 Converse
15 Lined up 16 Basset 18 Noted 19 Dent.

8 4 9
9 2 3 7 5 4 1 9 8 3 2 6
1 9 2 6 7 3 5 8 4
4 3 1 7 3 8 6 2 4 5 7 1 9
The winner of MoneyWeek Quick Crossword No.1180 is:
John Brandon of Winchester
1 8 6 8 6 3 4 1 7 9 5 2 Tim Moorey is author of How To Crack Cryptic Crosswords, published
by HarperCollins, and runs crossword workshops (timmoorey.com)
9 2 7 8 5 6 4 3 1
MoneyWeek is available to visually Taylor’s is one of the oldest of the founding port houses, family run and entirely
5 4 1 9 3 2 8 6 7
impaired readers from RNIB National dedicated to the production of the highest quality ports. Late Bottled Vintage
Talking Newspapers and Magazines 4 1 8 3 2 9 6 7 5 is matured in wood for four to six years. The ageing process produces a
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moneyweek.com 17 November 2023

42
Beware the Big Loss
Avoiding getting whacked is more important than the next big thing
WeWork: a cautionary tale for investors
Bill Bonner
Columnist
A
s we predicted, WeWork
didn’t work. “Former high-
flying startup WeWork filed for
bankruptcy” last week, “listing
nearly $19bn dollar of debts,
a fresh low for the co-working
company that struggled to
recover from the pandemic,”
reports Bloomberg. There’s
a lesson here for investors,
because our main goal is to
avoid just such a Big Loss.
The idea of the Big Loss
comes from the great Richard
Russell. He pointed out that
most people make most of their
money incrementally, over a
long period of time. They earn;
they save; they invest. If they’re
lucky they end up with a nice
little pile, but only after they
are well into middle age. The
danger is not that they will
miss the next great investment
opportunity (Amazon, Google,
etc) – those opportunities are
few, and unpredictable. The
real danger for most people,
over the age of 55 is not missing
out on some unknown new
innovation, but getting whacked
by something well-known that
turns out to be untrue.
In the 1990s, the threat of
the Big Loss came from the
faith that people placed in
the internet and the dotcoms.
Heavily investing in the sector
would be OK for the young.
17 November 2023
Last word
They don’t have much to lose
and the important thing for
them is to learn. The popping
of the bubble provided a lesson
they wouldn’t soon forget.
The next Big Loss came in the
property. It looked like a sure
winner. In 2002, the median
house sold for $145,000. By
2007, it was $215,000. In other
words, it gained about $15,000
per year. Assuming the buyer
put down a 20% deposit, that
was a return on cash of nearly
50% per year for five years.
Smart investors figured out how
to leverage it – “flipping” houses
themselves, or investing in
housing-related industries.
“The dotcom bubble
provided a lesson they
wouldn’t soon forget”
There was a lesson to learn
there, too. Over the next five
years, the median house lost
$45,000 in value. The buyer
in 2007 would have seen his
entire 20% deposit wiped out.
As a homeowner, he could hold
on for another five years and he
would have been okay. Prices
came back. But the speculator,
flipping multiple houses or
buying shares in a go-go
mortgage lender, was doomed.
Countrywide Financial
Corporation, for example,
was regarded with awe in the
business world. It would have
turned $1,000 invested in
©Alamy
1982 into $230,000 by 2003.
In the wake of the financial
crash, Bank of America bought
Countrywide for a sixth of its
market value before the crisis
began. That was a loss of 83%.
The next big opportunity for
a Big Loss came in cryptos. A
few people got rich – especially
those who got out early. Most
cryptos were dreamy scams.
Pity the poor investor who put
his whole wad into them.
And then came a Big Loss
in an area that should have
offered no loss at all – bonds. An
oft-stated allocation rule is that
you should subtract your age
from 100; the remainder is how
much of your money you should
have in stocks. As you get
older the allocation to equities
(considered risky) goes down.
The rest, typically, is invested in
the safety of bonds. But bonds
are less safe now that the feds
have shown themselves willing
to “print” their way out of any
emergency. That’s why we have
no bonds in our own portfolio.
Since 2020, the US Aggregate
Bond index is down 17%. After
inflation, investors have lost
about a third of their value.
US Treasuries should be the
safest credit in the whole world.
They’ve been going down for
the last 39 months, the longest
drawdown in history, so odds
are they will recover in the
months ahead. But they are far
from safe. Remember, the Big
Loss always comes as a surprise.
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