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MAKE IT, KEEP IT, SPEND IT 26 JANUARY 2024 | ISSUE 1192

A new lease of life

Tackling the ailments
of old age
Page 18

BRITAIN’S BEST-SELLING FINANCIAL MAGAZINE MONEYWEEK.COM

 26 January 2024 | Issue 1192 Britain’s best-selling financial magazine

From the editor...

What have the this week; another is that it
robots ever done for overshadowed a far more
us? We constantly important milestone elsewhere,
hear all about as US news inevitably does.
how artificial On Monday the value of
intelligence (AI) is going to India’s stockmarket eclipsed
change our lives in the future, that of Hong Kong’s for the
but I’ve found it very difficult to first time. Indian equities are
pinpoint immediate benefits so worth a collective $4.33trn,
far. This week, however, I think compared with $4.29trn for
I found one: a better night’s Hong Kong. The former have
sleep. Not for me, sadly, but for amassed half their value in the
analysts at The Bank of New past four years.

©Getty Images
York Mellon.
The group’s CEO of Global The robots will ensure we get more sleep Signs of the times
Market Infrastructure said India becoming the world’s
this week that the bank was “The fuss over the S&P 500’s peak obscured a fourth-largest stockmarket is
“investing in the employee only one sign of the structural
experience” by making AI do the
far more significant milestone elsewhere” shift that appears to be taking
basic groundwork for its research team. of New York Mellon’s help explain why AI place in the developing world. China is
Instead of getting up at 4am, they can is no longer mentioned quite as frequently becoming weaker and weaker (see pages
get up at 6am because AI has provided a in earnings calls as it was in the middle of 4 and 16), while India is now beginning to
“rough draft… and served up a bunch of last year (see page 5). take centre stage.
data for them”. One term that is being mentioned An article in a German financial weekly
more frequently, however, is “soft notes that Indian states and companies
AI: a work in progress landing”. An intriguing snippet on are now a key presence among the movers
Good news for the staff, of course, social-media platform X this week showed and shakers at Davos; the only German
but I hope the bank has considered that mentions of the term in Bloomberg company the writer could see represented
the customers’ experience too. We have articles jump before US recessions occur. was software group SAP.
all heard plenty of stories about AI They spiked shortly before the 2001 He noted that the Gulf states are
drafting gobbledegook (and it is also recession began, and a year or so before banging the drum increasingly hard
clearly not yet clever enough to realise the slump in 2008-2009. A bump in (see page 15), while OpenAI’s boss Sam
that much bank research is done for 1989 was also followed by a contraction Altman was also a star of the show. I
marketing purposes and ends up straight a year later. Moreover, analyst Gerard strongly suspect, however, that he still
in the recycling, so there is no need to get Minack of Minack Advisors notes that writes his own speeches, and gets up very
up so early). the S&P 500 is “typically within 2% of early indeed.
There are, of course, still plenty its cycle high two months before the start
of stories out there highlighting AI’s of a recession”.
impressive potential (see page 6), but Those are two reasons not to pay too Andrew Van Sickle
underwhelming reports such as the Bank much attention to the S&P’s new record editor@moneyweek.com

Good week for:

Material fans Jamie Dimon, chairman and CEO of JPMorgan Chase, was paid
Two fans are suing $36m for last year, the biggest pay cheque he has received from
Madonna the US bank he has run since 2005, and 4% more than he earned in
(pictured) in New 2022, says The Wall Street Journal. The bank posted record-high
York for taking the annual profits of $50bn for 2023. Dimon’s pay was made up of
stage two hours $1.5m in salary and a $34.5m bonus, which is mostly paid in stock.
late at a concert
held in the city on Denmark’s new king Frederik X has published a book “seemingly out
13 December. The of nowhere” and just three days after taking the throne, says BBC
claimants argue they News. The King’s Word, which costs 250 kroner (£29), has already
had been “left
Cover illustration: Howard McWilliam. Photos: ©Getty Images; Shutterstock; Phillips

outsold last year’s bestseller at online bookshop Saxo, selling 25

stranded” with limited
transport afterwards and that they had “had to
get up early to go to work” the next morning. It is
becoming an increasingly common complaint,
but come on, says Alexis Petridis in The Guardian.
Their argument won’t “cut much mustard with
anyone… old enough to remember a time before
golden circles, cordoned-off glamping areas at
festivals… and all the other latter-day additions
that have turned gigs into a branch of the
hospitality industry”. Madonna is an artist. That
said, the cheapest seats at her London shows cost
£50, assuming you didn’t have to pay £1,870 on a
resale site. “Nothing generates a sense of
entitlement like spending the best part of a grand
©Getty Images
copies a minute on the news of its release. In it, King Frederik shares
his thoughts on various topics, including Denmark’s place in the
world and his relationship with his wife, Queen Mary.
Bad week for:
Actor Arnold Schwarzenegger (pictured) was detained at Munich
airport for three hours due to confusion over whether he had to
declare a watch he was taking to Austria to be sold as part of a
charity auction, says the Robb Report. Officials also struggled to
find a working card machine, so he could pay the import duty. The
watch, however, sold for €270,000, well above its pre-sale estimate.
Trendy private members’ club The House of St Barnabas, in
London, whose founding members in 2013 included actor Peter
Capaldi, and whose profits supported an associated homeless

on a couple of gig tickets, if attendees have to charity, has gone bust, says The Times. The £870-a-year club fell to
leave before the end to catch the last train home.” a £229,950 loss last year after making a £105,119 profit in 2022.

moneyweek.com 26 January 2024

4 Markets

US stocks reach new record peak

Alex Rankine
Markets editor

America’s benchmark S&P 500 stock

index has reached a new all-time high.
“After a rocky start to the year” the US
market “has found its footing”, say Krystal
Hur and Nicole Goodkind for CNN. The
S&P ended last week at 4,839.81 points,
eclipsing the previous 4,796.56 record that
had stood since 3 January 2022. The rally
continued this week, with both the S&P
500 and Nasdaq 100 technology-stock
benchmarks reaching further record highs
on Monday and Tuesday. US shares have
gained 35% since their October 2022 low.

Altitude sickness
It doesn’t feel much like a bull market,
says Robert Armstrong in the Financial
Times. A “fierce” rally that began in

October has given way this month to a
“wheezing sideways” market. The high has
been driven by a handful of tech stocks,
while two-thirds of companies in the S&P
500 have actually seen their share prices
slip. Stocks might be heading for “a bout of
altitude sickness”.
This rally is not as narrowly focused
on a few tech stocks as often claimed, says
John Authers on Bloomberg. Exclude the
“Magnificent Seven” tech megacaps from
your calculation, and the S&P is still not
far off an all-time high. Similarly, compare
performance with the S&P 500’s last peak
two years ago and you will find that one of
the biggest losers over the past two years is
actually tech giant Tesla (down 40%). By
contrast, “the best-performing sector has
been energy, gaining 40%”.
The jump in US share prices over the
past two months had a clear cause, says Ben
Levisohn in Barron’s: markets began to bet
Excessive state spending has made it seem as if the Covid chaos never happened
that the US Federal Reserve had stopped
raising rates and was planning cuts. Yet this
month has seen Fed policymakers pour cold
water on the idea of imminent cuts.
So why has the rally continued? Recent
data has fuelled optimism about the
strength of the US economy. That could be
particularly good news for small-cap stocks,
whose profits are highly dependent on the
resilience of the American consumer. The
market “might not get what it wants from
the Federal Reserve, but it may get what it
needs” from a robust US economy.
US stocks need as much good news as
they can get if they are to justify their rich
valuations. The S&P 500 is now trading at
19.88 times 12-month projected earnings,
says Karen Langley in The Wall Street
Journal. That is the highest rating since
©Getty Images
April 2022 and well above the ten-year
average level of 17.93.
The US rally rests on two unsteady props,
says James Mackintosh in the same paper.
One is rich valuations, partly based on AI
hype. The second is excessive government
spending, which has made it seem as if “the
Covid chaos” never happened.
If you had invested in the S&P 500
in December 2019 and gone to sleep
for three years you would have made
6.8% annualised returns (with dividends
reinvested) by the end of last year, “bang
in line” with the historical average. Yet
“surely the economy can’t just be closed
down without any repercussions for growth
or share prices?”. While US stocks won’t
necessarily crash, it would be wise to “plan
for lower returns ahead”.

Global investors give up on China

Western investment banks (£218.7bn) of cash held by
started the year tipping state-owned firms to buy local
Chinese stocks, betting that shares as part of a stabilisation
last year’s delayed post-Covid fund. That package “should
recovery would finally come be able to stem declines in
good, say Hudson Lockett and the short term… but state
Joe Leahy in the Financial buying alone has historically
Times. Yet foreign investors had limited success in turning
are already throwing in the around market sentiment”,
towel. Financial Times says Marvin Chen of
calculations show that almost Bloomberg Intelligence.
33 billion yuan (£3.62bn) of Even China’s own statistics
foreign money has left the highlight “Japan-style
©Getty Images

equity market this year (as of deflation and high youth

19 January).
“Heady optimism about
China Inc. is an increasingly
distant memory,” says The
Economist. In the 2010s,
international investors
“clamoured for exposure” to
the country’s “growth
miracle”. By 2022, “foreigners
owned $1.2trn of stocks in
The Middle Kingdom’s own statistics point to Japan-style deflation
mainland China and Hong
Kong”, between 5% and 10%
of the whole market.
The dream has since soured
amid tense geopolitics and
a huge slump in the local
property market. The CSI 300
stock index has slid by 22%
in a year, says Bloomberg
News. Since the 2021 peak,
$6trn has been wiped from
the market value of Chinese
and Hong Kong stocks. That
has spurred officials into
action: they are considering
mobilising two trillion yuan
unemployment”, says Paul
Krugman in The New York
Times. A model based on
investing 40% of GDP back
into the economy has run into
diminishing returns, while the
working-age population
peaked in 2010 and has slid
ever since”. That’s not a good
backdrop for an equity rally.

26 January 2024 moneyweek.com


Oil off the boil
despite turmoil
Rising geopolitical peril has yet
to shake oil out of its slump.
Oil prices briefly ticked higher
on Monday as the US and the
UK launched further air strikes
against Houthi militants in
Yemen, says Spencer Kimball
for CNBC. Perhaps even more
significantly, a “suspected
Ukrainian drone strike against a
major Russian fuel terminal” in
the Baltic was a “timely
reminder that a bigger, more
influential war” is still being
fought, says John Evans of PVM
Oil Associates. Yet oil sold off
again the following day. Trading
around $78.50 a barrel earlier
this week, Brent crude is down
by 16% from a September peak,
although it has edged higher
since the start of the year.
The 2011 Arab Spring, which
shut down Libyan supply and
threatened the stability of other
key regional producers,
triggered a 45% rise in global oil
prices by March 2012, says
Caroline Bain of Capital
Economics. By contrast, the
market’s “sanguine” reaction
to the present Middle Eastern
instability reflects the fact
that “so far, oil output is
unaffected”. While a prolonged
shutdown of the Red Sea
transportation route would
raise journey times and freight
costs, ultimately “the oil will
still be produced and will still
arrive at its destination, albeit at
a later date”. With strong supply
from the US, Guyana and Brazil,
as well as signs of faltering
demand for fuel in Europe and
the US, oil prices are being
decided by forces beyond the
Middle East.
Viewpoint
“Analysts... have been perplexed by
[US] public dissatisfaction with the
economy... In the era of modern
economic data, Harry Truman was the
only president besides Joe Biden to
oversee an economy with inflation over
7% while unemployment stayed under
4% and GDP ... kept climbing. Voters
[saw] Truman as incompetent... Postwar
inflation was... similar to post-pandemic
inflation. The end of wartime rationing
unleashed years of pent-up consumer
demand in [the] economy... The most
severe inflation of the last 100 years
wasn’t in the 1970s, but in 1947, reaching
around 20%... [inflation relented and]
Truman won in perhaps the most
celebrated comeback in American
electoral history... [That said, since 1952]
there is no precedent... for voters to have
an above-average view of the economy
once inflation cracks 5% – the recent
high was 9% in June 2022.”
Nate Cohn, The New York Times
moneyweek.com
Markets
Private-equity boom is over
“After decades of triumphalist
money making”, the private-
equity industry “faces a
reckoning”, says John Plender
in the Financial Times. Modern
private equity traces its roots
back to the “corporate raiders”
of the 1980s, who took
companies private via leveraged
buyouts in order to restructure
them and raise their value.
Today, leading private-equity
names include The Blackstone
Group, The Carlyle Group and
KKR. Private equity typically
requires investors to lock up
their money for many years,
with the investors expecting
better returns than those
available on public markets
in return for the increased
difficulty of liquidating their
holdings. Ordinary investors
are bit players in the industry,
with most investment capital
coming from large institutions,
such as pension funds and the
very wealthy.
The end of the boom
Ultra-low interest rates fuelled
a long boom in private equity,
say Andres Gonzalez and
Pablo Mayo Cerqueiro for
Reuters. Between 2012 and
2021, the annual amount
raised by private capital (a
wider category that also
includes other types of private
investment) almost tripled,
peaking at $1.7trn in 2021.
That figure has since dropped
by a third. Higher interest rates
make the traditional method
n The fizz over artificial intelligence goes flat
References to generative AI by US corporations
Russell-3000 corporate transcripts, quarterly
3,500
3,000
2,500
2,000
1,500
1,000
500
0
022 022
Q1 2 Q2 2 Q3 2
©Shutterstock
of borrowing to fund leveraged
takeovers less lucrative and
riskier than it was.
Weak stockmarkets have
also made private-equity
funds reluctant to cash out of
their existing investments,
says Bloomberg. American
private-equity firms bought
or sold $871bn in assets in
2023, the lowest figure in
seven years. A revival in deal-
making is unlikely until the US
Federal Reserve begins to cut
interest rates.
In any case, firms that were
taken private during the recent
buyout boom are unlikely to
re-enter public markets anytime
soon, says Brenda Rainey of
Bain & Co. Private-equity
investments typically run for
about a decade. “The industry...
is a snake digesting an elephant
that it swallowed in peak deal-
making years.” Private-equity
buyouts and initial public
022 022 0 23 0 23
Q4 2 Q1 2 Q2 2
5
Buyouts and flotations
drive activity on Wall Street
offerings (IPOs) play a key role
in driving wider activity on
Wall Street, say Laura Cooper
and Ben Dummett in The Wall
Street Journal. Yet in 2023
much of the industry sat on
the sidelines. That drought has
deprived bankers and lawyers
who service those deals of the
big bonuses they’ve become used
to in recent years.
High rates are not
unprecedented for private-
equity trusts, most of which
“have been in existence since
before the 2008 financial
crisis”, says Val Cipriani in the
Investors’ Chronicle. But the
model does face headwinds in
a higher-rates regime. Given
high starting interest rates, says
Daniel Lockyer of Hawksmoor
Investment Management, it will
be harder for private equity to
outperform public stockmarkets
over the coming decade than it
was during the last one.
Has the hype about artificial
intelligence (AI) already
peaked? asks Jim Reid of
Deutsche Bank. As recently as
the fourth quarter of 2022 the
topic was little discussed by
leaders of America’s listed large
and small-cap firms during
conference calls with investors.
Discussion then exploded in
2023, topping 3,000 mentions in
both the second and third
quarters. Yet the figure slipped
back to 2,500 mentions in the
fourth quarter, suggesting that
the theme is already growing
stale. While some of the
Source: Deutsche Bank / Bloomberg Finance
“froth” and “pie-in-the-sky”
discussion around AI may be
relenting, more serious players
still have their eyes on the prize.
The likes of Microsoft hope to
be able to turn big profits from
the technology within the next
0 23 0 23 12 months.
Q3 2 Q4 2
26 January 2024
6 Shares

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

Five to buy
Ibstock
The Mail on Sunday
A “lacklustre” housing market
and tough trading have seen
shares in Britain’s top brick-
maker halve in three years.
This year will be difficult,
too, as housebuilders scale
back construction. But on a
medium-term view the outlook
is brighter. Hit by inflation,
Ibstock is delivering “chunky”
cost cuts, while innovations
to make low-carbon and
lightweight bricks should help
Ibstock maintain its leading
market position. 144p
Costain Group
Interactive Investor
Shares in this infrastructure
contractor plunged by 90%
between 2018 and March
2020 following a succession
of delays and disappointments
on key contracts. Operating
margins remain razor-thin, but
on a forward price/earnings
(p/e) ratio of 6.3, many of the
problems are in the price. The
country needs to invest heavily
in the energy grid and updating
ailing water infrastructure,
which implies steady demand
for Costain. With big asset
managers such as BlackRock
...and the rest
Investors’ Chronicle
Management at professional-
services group Gateley has
provoked the ire of investors
because of its reluctance “to
commit to full-year guidance”.
Transactional legal work
is thin at present and the
macroeconomic picture is hazy.
While the shares are not dear on
a forward price/earnings (p/e)
ratio of 20, the uncertainty is
“unsettling”, so “downgrade to
hold” (145p).
Shares
“Highly price-conscious”
taking an interest in
infrastructure, the sector could
be due a rerating. 72p
Safestore
Investors’ Chronicle
Weakening property values
have hit profits at this self-
storage landlord and operator,
but its underlying performance
is encouraging. Underlying
earnings rose by more than
5% for the year to 31 October
as expansion and acquisitions
brought in new customers.
Given the weak economic
backdrop, a 3.7% dividend yield
and 8% rise in net asset value
(NAV) per share is impressive
and seems to represent decent
value. “Contrarian buy.” 811p
Seeing Machines
The Sunday Times
Many “outlandish” claims
are made about artificial
consumers have been blamed
for a profit warning at Marks
Electrical, an Aim-listed retailer
of domestic appliances and
consumer electronics. However,
such “macroeconomic”
adversities are beyond
management’s control, so
shareholders should stick with a
intelligence (AI), but this aim-
listed road-safety specialist
might be one of the few able to
deliver. The Australian group’s
technology, already deployed
in more than a million cars and
tens of thousands of commercial
vehicles worldwide, monitors
drivers’ behaviour and alerts
them if they start to show signs
of fatigue. Regulation means
such driver-monitoring systems
are quickly becoming standard
in new vehicles, so although still
loss-making, the firm enjoys a
substantial tailwind. 5.3p
One to sell
British American Tobacco
The Telegraph
The tobacco industry finds itself
squeezed between a shrinking
and ever more regulated market
for its legacy products, and an
emerging clampdown on the
business that continues to
perform well on what it
can control: winning market
share and a strong reputation
for service from satisfied
customers (69p).
The Mail on Sunday
Aim-listed packing specialist
Mpac makes sure that
everything from insulin-
monitoring patches and ice
cream to pyramid teabags are
correctly packaged and ready
for the consumer. The shares
are cheaper than those of many
peers and the global market
Trustpilot
Shares
Shares in this Danish
consumers’ review platform
have doubled in the past six
months thanks to “repeated
earnings upgrades” and a
promising new CEO. There is
competition from the likes of US
rival Yelp, but with 167 million
reviews and thousands of firms
using Trustpilot for consumer-
data analytics, it enjoys
“valuable network benefits” and
is finally putting “more muscle
on margins”. 161p
next-generation products such
as vapes, on which it has staked
its future. Alarmingly popular
with the young, vapes are
coming under growing scrutiny.
Late last year BAT admitted
that its American brands were
worth £25bn less than initially
estimated. The forecast dividend
yield tops 10%, but that is likely
to prove “too-good-to-be-true”
and suggests the market believes
the payout is unsustainable.
Cigarettes have long been an
income stalwart, but it might be
time for investors to “kick the
habit”. 2,335p
opportunity is vast. Keep
buying (338p).
The Telegraph
With Boeing under pressure,
investors should look at
Embraer, the world’s third-
biggest aircraft-maker. The
Brazilian firm has returned
161% in sterling terms over the
past three years amid a post-
pandemic recovery in demand
for its small jets and military
aircraft. On a reasonable 13
times forecast earnings, the
New York-listed firm still has
altitude to gain. Buy ($17).

A German view IPO watch

China is no longer simply the workshop of the world, says
WirtschaftsWoche. It is moving up the value chain and its
products are becoming increasingly sophisticated. Take Fuyao
Glass Industry Group, which specialises in industrial and
automotive glass. The latter division has proved highly
successful, with most big car manufacturers using Fuyao’s
products, as they are impressed with their quality. The group has
achieved a global market share of 30%. Sales and profits are both
increasing at double-digit rates. ln the first half of 2023, revenue
FNZ, which provides the technology that powers investment
platforms, along with business services and financial products,
says it is likely to go public in three years, says Citywire. The group,
which was established in New Zealand in 2003 and has a large
base in Edinburgh, has won contracts to partner with Virgin Money
and the challenger bank Monzo in the past year. Founder and CEO
Adrian Durham is reportedly hoping for a valuation of $50bn at the
initial public offering (IPO), which would be one of the largest on
record for a fintech group. FNZ is expanding its presence in North
America and has notched up yearly sales of roughly $1.1bn (up by
©Getty Images

reached €1.9bn and the bottom line expanded by €370m. The 30% on the previous year) and $320m of earnings before interest,
stock also offers a dividend yield of 4.4%. taxes, depreciation and amortisation (Ebitda).

26 January 2024 moneyweek.com

8 Politics & economics

Trump’s path to victory

The Donald has cleared the first few hurdles, but can he really win again? Emily Hohler reports
Donald Trump is the Republican Party’s
“once and future king”, says Lloyd Green
in The Guardian. He may have failed to
knock rival Nikki Haley out of the contest
for the Republican presidential nomination
on Tuesday with his win in the New
Hampshire primary, but he is “the first
non-incumbent Republican to win
both Iowa and New Hampshire” and is
far ahead of Haley in the polls for South
Carolina’s contest next month. His
momentum is potentially “unstoppable”,
agree Lauren Fedor and James Politi in the
Financial Times, putting him on course for
a “rematch” with Democratic incumbent
Joe Biden in the November election.
©Getty Images

Awestruck coverage
If Haley cannot win in New Hampshire,
where her typical supporter is “heavily
overrepresented” and she splashed double
Trump’s $15.7m, she “cannot expect to
win anywhere”, says The Economist.
Trump, for his part, just wants to “wrap
up the nomination race” so he can turn
his attention to Joe Biden in a rerun of
the acrimonious 2020 contest that many
Americans “dread”, says Alex Leary in The
Wall Street Journal.
If this happens, the race would feature
the “unprecedented dynamic of Trump
splitting time between the campaign and the
courtroom”. His first federal criminal trial
is due to start on 4 March, the day before
“Super Tuesday”, when the greatest number
of US states hold primaries and caucuses.
If he wins a second term, his “chaotic
style and unstable personality make
predictions difficult”, but expect “tariffs,
the possible abandonment of Ukraine and
Taiwan, a transactional approach to other
allies, aggressive bartering with enemies
and a further decay of global rules”, says
The Economist.
The media’s “awestruck coverage”
risks creating a “false impression” that a
Trump win is all but assured, says Robert
Reich in The Guardian. Yet just 56,260 of
2,083,979 registered voters in Iowa voted
for him last week. Not exactly a “stunning
show of strength”. No one should confuse
his performance in the primaries with
success in the presidential election. Former
presidents have a “huge advantage in their
party’s primaries because they control
their party apparatus. Presidents who
have served just one term and seek the
nomination for another are always re-
nominated by their party.”
Even if Trump has not yet been
convicted, “I doubt that the majority of
Americans will want for their president a
man who has 91 criminal charges against
him, who has been impeached twice, who
has orchestrated an attempted coup, who
has profited financially while president,
who has stolen top-secret documents and
who has been judged to be a rapist.”
Trump: the once and future king?
Joe Biden is almost as delighted as Trump
by his recent success, says Peter Spiegel in
the Financial Times. He thinks he can hold
Trump up as a “threat to democracy” and
boost his own changes. This is “morally
ambiguous and strategically short-sighted”.
It “reeks of hypocrisy”, “undermines the
high ground team Biden wants to occupy”
and may reduce his own chances of victory.
Team Biden may think that fear of
Trump will lead energised Democrats to
flock to the polls as they did in 2020, but
this is not 2020. Voters are “not enthused
by a rematch of two senior citizens” and are
suffering from “political fatigue”.
Conveniently for Biden, “voter attitudes
towards the economy are beginning to
brighten… thanks to cooling inflation” and
if this continues, he may win over swing
voters. He “has a centrist record he can run
on, including domestic industrial policies
and international alliance-building that
have bipartisan appeal”. Just as well, since
“rallying the base won’t be good enough”.

Will US-UK strikes lead to wider conflagration?

Two weeks of “limited” joint
UK-US air strikes on Yemen’s
Houthis, who have been
attacking commercial shipping
in the Red Sea, appear to have
done “little more than
encourage the Houthis”,
providing a “sugar hit of
legitimacy” as it burnishes its
image in the wider Middle East
as a “defiant force against
imperialism and defender of
the Palestinian cause”, says
Nicola Smith in The Telegraph.
Although their military
assets seem to have been
weakened by the air strikes,
years of facing a “powerful
Saudi-led coalition” during the
recent civil war in Yemen have
©Getty Images
vastly superior weapons
supplied by the West.
Washington may have
“opened itself up to a
geopolitical checkmate”, says
Murtaza Hussain in The
Intercept. Continued strikes are
likely to lead to more shipping
disruption and even “regional
war”. Hisham Al-Omeisy,
senior adviser on Yemen at the
European Institute of Peace,
warns the conflict is the
“perfect opportunity” for the
“expansionist” Houthis “to say
that they are the real vanguard
of the Arab nation, while other
nations are complicit in the
suffering of the Palestinians”.
If we are sliding towards
brakes”, says Aris Roussinos in
Unherd. The air strikes are
minimal and well telegraphed
(whether by accident or
design). Similarly, the targets
of Iran’s “recent and dramatic
ballistic missile strikes across
the region” were relatively
inconsequential. These actions
seem simultaneously designed
to escalate and de-escalate.
The problem is, the “only
viable means” of halting the
crisis “is Israel declaring its war
aims fulfilled” and ending the
Gaza conflict, an outcome that
“goes against Benjamin
Netanyahu’s direct interests in
political survival”. If the pace of
escalation is “reassuringly

American action has been

taught it to conceal its military war, at least the primary actors slow”, the threat of a broader
minimal and well telegraphed
arsenal and outmanoeuvre “are pressing heavily on the conflict remains very real.

26 January 2024 moneyweek.com

10
Chicago
ADM investigated: Shares in Archer
Daniels Midland (ADM), one of the world’s
largest crop traders, fell almost a quarter
on Monday after it placed its chief financial
officer on leave amid an investigation into
accounting practices, say Gerson Freitas
Jr and Simon Casey on Bloomberg. The
stock’s fall wiped out $8.8bn from ADM’s
market value. The US firm also cut its
earnings expectations for the year and said
it will postpone the release of its fourth-
quarter results, which had been scheduled
for this week. Ismael Roig (pictured) will
become interim CFO, replacing Vikram
News
Luthar, who had been in the role since and soybeans,
2022. ADM says it is cooperating with the and producing
Securities and Exchange Commission, the edible oils,
US markets regulator, following a voluntary sweeteners and
document request. The probe centres on biofuels. But the
ADM’s nutrition business, its smallest, yet nutrition division is
strategically important, unit as it seeks to the least connected to global wholesale
diversify revenue streams into higher-value agricultural commodities trading, which
processed products. The nutrition business, has actually been the focus for calls for
which has struggled as demand for plant- more regulation, says Lex in the Financial
based products has waned, made $7.6bn in Times. A recent UN report said lax
revenue in 2022, 7.5% of the group’s total. oversight meant traders do not record
The majority of ADM’s revenue comes transactions clearly, which could lead to
from selling raw crop grains, such as corn higher prices.

Los Gatos
King of the ring: Streaming giant Netflix added 13.1 million subscribers in the
three months to the end of December, its strongest fourth quarter on
record and well ahead of analysts’ expectations
of nine million, say Jessica Toonkel and
Joe Flint in The Wall Street Journal.
The platform ended 2023 with 260
million subscribers, up 13% from the
previous year. Meanwhile, fourth-
quarter revenue rose 12.5% from a year earlier
to $8.8bn, thanks to its crackdown on password
sharing and the introduction of new advertising
subscription tiers. Netflix has also struck a ten-year, $5bn
deal to secure US and international rights to broadcast WWE
wrestling (wrestler Katana Chance is pictured) in a bid to broaden
its content offering and lure in advertisers. The results cement
Netflix’s position as the dominant platform as rivals struggle to turn
a profit from streaming and deal with ailing networks. Paramount
is considering merging with Warner Bros. Discovery, while Disney is
in talks to take control of streaming service Hulu. But as Netflix goes all
out to keep adding new eyeballs, shareholders could be setting themselves up
for disappointment. The streaming giant is trading at nearly 30 times earnings
for the next 12 months, according to the London Stock Exchange Group, which is
comparable to Microsoft and higher than Facebook’s owner Meta Platforms’ 20 times.

Cincinnati
Shoppers keep shopping: Consumer-goods
group Procter & Gamble (P&G) “[knows] how
to raise prices just enough to bring buyers of its
Pampers diapers and Pantene shampoo to their
pain point”, says Jennifer Saba on Breakingviews.
Sales by volume in the $366bn company’s second
fiscal quarter “barely” fell from a year earlier,
despite P&G raising prices by 4% on average
across its five divisions. In fact, organic sales
actually rose 4% to boost the top line to $21.4bn.
But P&G was also able to take advantage of
falling consumer prices overall to boost its
gross margins by five percentage points to 53%,
which translated into a 7% reduction in the cost
of production. In other words,
“consumers keep losing at P&G’s
expense”. P&G says it will reinvest
some of the savings by, for example,
making its Ariel fabric softener more
environmentally sustainable, but that could
also serve as an excuse to keep prices higher
for longer. It’s proof US consumers are
now feeling the effects of inflation, yet they
remain resilient. Sentiment is the highest in
two years, notwithstanding global unrest
and job-market swings. P&G has found the
“peak pressure point” between prices and
sales, while its costs continue to fall.

The way we live now... the US bosses flying high on the company dime
Bosses at some of the biggest
companies in the US used their firms’
private jets for personal travel at a
combined cost to their companies of
$65m in 2022 – a 52% rise from before
the pandemic, mainly due to higher
fuel costs, say Theo Francis and
Stephanie Stamm in The Wall Street
Journal. Facebook’s owner Meta
Platforms spent $6.6m on private
flights for boss Mark Zuckerberg and
then-chief operating office Sheryl
Sandberg that year – a 55% increase
©Getty Images
which were subsidised flights for its
chief executive, Ramon Laguarta.
Businesses defend the practice as
being safer and more efficient, but to
critics they remain a symbol of excess
and indulgence, and environmentally
harmful. They can also land firms in hot
water. Use of the company aircraft
hastened the exit of Credit Suisse’s
chairman António Horta-Osório in 2022,
while last June the Securities and
Exchange Commission, the US
regulator, also charged Stanley Black &

from 2021, while PepsiCo’s spend Decker for failing to disclose $1.3m in
doubled to $776,000 on personal executive perks, mainly related to
Safer and no queues for the toilet
flights for five executives, two-thirds of private-jet use, between 2017 and 2020.

26 January 2024 moneyweek.com

 News 11
Scunthorpe
More blows to industry: British Steel warned it made a “significant loss” in 2022,
blaming soaring energy and raw material costs in the wake of Russia’s invasion of
Ukraine, says Isabella Fish in The Times. Auditor Moore Kingston Smith also
unexpectedly quit a year after being appointed. It struggled to verify £45.8m worth
of stock and flagged “material uncertainty” over the company’s ability to operate
without a cash injection from its Chinese owner, Jingye. Delayed accounts for the
2021 financial year were only posted last week and statements for 2022, to be filed
by last September, are outstanding. Britain’s second-largest steelmaker swung to
a £49.5m loss in 2021 from a £267.8m profit the previous year as energy costs
dented margins, despite revenue in the period increasing to £1.5bn from £844m.
British Steel said it is confident it would have enough funding for the next 12 months.
Jingye has rejected the government’s £300m offer to help with energy costs and
fund a move away from fire blast furnaces. The figure is a “drop in the ocean”,
according to multi-union chair Paul McBean, as a move to a carbon-neutral plant

©Getty Images
would cost around £3bn. The uncertainty at Lincolnshire-based British Steel
threatens its 4,500 workforce and follows Tata Steel’s announcement last week British Steel is feeling the heat
that it will close two blast furnaces in Port Talbot with 2,800 job losses.

Tokyo
Sony turns off Zee: Tech conglomerate Sony has
terminated its plans to create a $10bn media
powerhouse by merging its Indian unit with
Mumbai-based Zee Entertainment, says
Sayan Chakraborty on Nikkei Asia. Sony has
backed out of the deal after more than two years
of talks due to regulatory concerns. India’s market
watchdog is investigating Punit Goenka, the
current CEO of Zee and son of founder Subhash
Chandra, for allegedly diverting company funds
to other entities and firms related to its founding
shareholders. They both deny wrongdoing. Sony
had also wanted NP Singh, currently the head
of its India unit, to lead the new company, but
Goenka refused to step down. Meanwhile, Zee
has been battling US investment management
firm Invesco, its largest shareholder, which had
accused the company of poor governance and
sought to sell Zee to Mukesh Ambani’s Reliance
Industries. Sony’s retreat from a deal with a tricky
local partner is a “smart move”, says Pranav Kiran
on Breakingviews. The company has
avoided the mistakes of other firms,
such as Japanese pharmaceutical Daiichi
Sankyo, whose acquisition of Ranbaxy
Laboratories soured because of governance
issues. That said, the failed merger will
create “some collateral damage” and force
companies to rethink deals. Mega-mergers
were seen as a way to stimulate India’s
entertainment industry, which is struggling
to profit from streaming. Zee’s revenue has
“barely grown” in the last five years.

New Brunswick Hong Kong

J&J puts claims to bed: Johnson & Johnson will pay $700m
to settle claims made by 42 US states and Washington, DC, over
whether the pharmaceutical giant misled people about the safety
of its talc baby powder and other products, says Annika Kim
Constantino on CNBC. The tentative deal does not resolve 52,000
consumer lawsuits, some of which are set to go to trial this year,
alleging that the company’s talc-based products caused cancer. J&J
says the now discontinued talc baby powder and other talc-based
products were safe for consumers. The group, however, faces paying
billions of dollars more to settle claims. Last July, J&J planned to
pay $8.9bn as part of a plan that would have involved lumping
liabilities onto LTL Management, a subsidiary, and then LTL filing
for bankruptcy protection, but a judge rejected that plan. Despite
the legal headwinds, J&J posted higher fourth quarter net earnings
of $4.1bn compared with $3.2bn a year earlier, while adjusted
earnings per share came to $2.29, beating analysts’ expectations of
©Alamy; Getty Images
Gaming sector rallies: Gaming stocks,
including Tencent and NetEase, rose in
Hong Kong on Tuesday, the day after the
consultation period for proposed regulations
aimed at curbing players’ spending ended,
says Cissy Zhou on Nikkei Asia. The sector
took a hit when the draft regulations were
issued in December, with the “equivalent of
dozens of billions of US dollars” wiped off firms’
market caps. “Investors were not only spooked by
the inconsistency of Chinese policies, but also feared that a
new tech crackdown was approaching.”
More widely, the benchmark Hang Seng index jumped 2.5%
on the same day, following a Bloomberg report that China is
considering a two-trillion-yuan (£220bn) stockmarket rescue
package. Investors shouldn’t get too excited, however, says Chan

$2.28. This was driven by higher sales of its cancer drugs Darzalex
and Carvykti and its treatment for psoriasis, Stelara. The company
now expects adjusted earnings of $10.55 to $10.75 per share for
2024 and sales of between $87.8bn and $88.6bn.
moneyweek.com
Ka Sing on Breakingviews. Beijing might be “prepared to stop
some of the rot”, but it doesn’t appear to be a top priority. China’s
president Xi Jinping (pictured) didn’t mention the stockmarket once
in a recent study session of Chinese Communist Party cadres.
26 January 2024
12 Briefing

Private schools: are they worth it?

They are expensive – and about to get more so, assuming Labour wins the next election.
So do the sums still add up for private schools? Simon Wilson reports
What has Labour got planned?
If elected, as now seems likely, Labour is
committed to removing the VAT exemption
on private-school fees, meaning that (other
things being equal) fees will rise by 20%.
By charging VAT but letting schools retain
charitable status, those institutions will still
retain some tax benefits. These include gift
aid on donations, VAT relief on products
and services, and exemptions from stamp
duty, capital-gains and corporation tax.
Average school fees across the UK in the last
academic year (2022-2023) were £15,200,
net of bursaries and scholarships, so adding
VAT will mean parents stumping up an
extra £3,000 or so. At elite private schools,
it will mean considerably more. In London,
top-performing day schools (such as
Latymer Upper, St Paul’s and Westminster)
charge between about £24,000 a year and

©Getty Images
£34,000. VAT on top means almost another
five or six thousand. And top-end boarding Keir Starmer: if elected, he is committed to hitting private schools with more tax
schools now typically charge fees around
the £50,000 mark (Eton’s current yearly fee How would that hit state schools? universities, there’s typically far more
is £49,998), so parents will be stumping up The numbers work out at one or two extra money invested in “working the system”,
another ten grand per pupil. pupils per state school. That’s manageable, argue Francis Green and David Kynaston
especially given that overall pupil numbers in their book Engines of Privilege. Far
Will the schools absorb some of it? are set to fall by at least 100,000 a year greater resources are spent, for example, on
That remains to be seen. Many schools on average between 2023 and 2030 – an diagnosing special needs, challenging exam
offer discounts for payment in advance, overall drop of 700,000 (more than all results and guiding university applications.
and some parents are already trying to the children at private schools). According In total, Britain’s private schools deploy
minimise tax by paying more up front. The to the IFS, the net gain to the public resources per child of around three times
main lobby group for private schools, the finances – adding in extra tax revenues and the level of the average state school.
Independent Schools Council, argues that deducting extra spending needs – would
imposing VAT would be self-defeating, as still be about £1.3bn-1.5bn in the medium Are private schools still worth it?
significant numbers of parents would be to long term. That would fund a 2% Opinions will differ (and recollections may
forced to pull their children from private increase in spending on state schools – and vary), but on the face of it, the benefits are
schools – lowering the VAT tax take and one that’s much needed. Compared with crystal clear. Privately educated pupils “do
imposing additional costs on the state sector the average £15,200 private-school fee, better in exams, go to better universities
that outweigh the gains. However, the the average spend per state school pupil in and end up with better-paid jobs”, says The
Institute of Fiscal Studies, in an in-depth 2022-2023 was £8,000 (including day-to- Economist. Part of this is to do with all the
analysis by Luke Sibieta, published last day and capital spending). That spending underlying benefits of having wealthier
summer, disagrees. They estimate that gap between the sectors has dramatically parents – and the fact that many private
removing tax exemptions would raise about widened since 2010 – from 40% (£3,500) schools are highly selective with an intake
£1.6bn a year in additional revenue. That’s then to today’s 90% (£7,200). who are already more highly achieving
an effective VAT rate than average. But even when compared
of 15%, factoring
“Invest a year’s school fees in What are private with similarly affluent families, privately
in input deductions stocks instead and you could schools selling? educated Britons typically gain an edge
and exemptions for Bluntly, a better roughly equivalent to one higher grade at
specialist provision,
be a millionaire at 42” education than A-level. More than half of private-school
and including some additional revenue from is typically available in the state sector, pupils go on to one of the 24 Russell Group
charging business rates on private schools in notwithstanding the improvements universities (a club that includes most of the
England (as is already done in Scotland). in England’s state schools in recent best ones). About 4% get into Oxbridge –
decades. This means smaller class sizes, twice as many as the 2% from state schools.
Would pupils be forced out? better facilities, and a broader range of And, again, even factoring in the accrued
In the past, the effect of fee rises on demand extracurricular activities that help cultivate benefits of having richer parents, privately
has been weak. Overall, fees are up 55% in character. They are also selling exclusivity educated Britons earn 17% more by the
real terms since 2003, and up 20% in real and access to future networks: the price age of 25 than other workers. By the age of
terms just since 2010. But despite the stiff of admission means the pupil peer group 42, the gap is 21% for women and 35% for
rises, the share of pupils in private schools is overwhelmingly drawn from families men. Whether that makes up for spending
has remained steady, at about 6%-7%. This with similarly affluent backgrounds. While several hundred thousand pounds up front
time, with a sudden rise, it’s hard to predict plenty of private schools offer bursaries – soon to be plus VAT – is up to you. But if
with certainty what will happen. But and scholarships, in practice less than 4% you invested £25,000 in stocks for seven
overall, the IFS reckons (as a “reasonable of pupils have at least half their fees paid years of secondary school, and then left it
best judgement”) that an effective VAT rate for, while just 1% go completely free. The alone for 24 years, and assume a 7% annual
of 15%, if passed on, would lead to a 3%- final, crucial factor is that, to achieve the return, you’d have well over a million quid
7% fall in private-school attendance. best exam results and access to the top aged 42 (but an A-level one grade lower).
26 January 2024 moneyweek.com
14 City view

The year of the bankruptcy

Many small companies are about to go to the wall. Blame the government
industrial investments that qualify for
Matthew Lynn relief. They just have to hand over more of
City columnist
their profits every year to the Treasury.
The result? There is less free cash kept in
It is starting to become clear that 2024 will the company by the owners, money that
be the year of the bankruptcy. Consultancy could have been used to help them through
Begbies Traynor reports that 47,000 firms any periods of difficult trading.
are now on the “edge of collapse”. That is
25% more than the quarter before, and the Squeezed by rising wages and tax
figure has been rising rapidly for the last six Second, the living wage has gone up faster
months. Another 569,000 firms were found than the rate of inflation. The minimum
to be in “significant financial distress”, a amount employers can pay their staff
12% rise quarter-on-quarter. That was led went up by another 10% last year,
by construction firms, followed by those in significantly above the rate of inflation,
healthcare and education, then real estate. and more than most companies can
But the pain was felt across the economy. increase prices for their customers. The
That is just the latest warning sign. wage floor has doubled in cash terms
According to the Insolvency Service, since 2010, and is set to go up even more
company failures rose by 17% in the this year. Everyone wants to see wages rise,
year to September, hitting the highest and legally mandated minimums are one
level since 2009. In individual sectors, it of the best ways of combating poverty, as
is just as grim. This month, for example, well as preventing unscrupulous employers
the nightclub industry warned that it from exploiting low-earning workers. Even
was “on the edge of collapse”, and pubs so, there’s no point denying that the rising

and restaurants are shutting down at an
accelerating rate. The UK will probably
end the year with many fewer businesses
still trading than when it started.
It’s not the zombies suffering
Some may welcome that, reasoning that
we’re finally seeing a clear out of “zombie”
businesses, which will free up resources
and space for faster-growing companies to
emerge. There is, perhaps, an element of
truth in that argument. A few businesses
managed to stagger on with lots of cheap
money and some government support
during the pandemic, when it might have
been better if they had gone under. Yet for
most of the firms now running into trouble
that is unfair. The majority of the casualties
are small businesses that have hardly any
borrowing (no one will lend them money
©Shutterstock
Hunt: his wheezes have hobbled small firms
anyway, even if they ask for it). It is not
the zombies that are starting to go bust
– it is smaller companies that should be
completely viable. There are three culprits to
blame for the coming wave of bankruptcies.
First, the huge rise in corporation tax.
Chancellor Jeremy Hunt increased the
tax rate for companies from 19% to 25%
last year, a rise of almost a third at a
single stroke. Sure, there were tax breaks
at the same time that allowed companies
to claim back the cost of investment in
new plants and equipment. That is fine
for major corporations, but most small
businesses, especially those in the crucial
retail, hospitality and service industries,
don’t make the kind of large-scale
cost of staff is starting to hurt companies.
If you can’t raise prices or improve
productivity, then it just means profits are
lower, and at the margin that will push
some firms out of business.
Finally, the impact of frozen thresholds
and higher taxes have hit consumers. Retail
sales fell by more than 3% in December,
even though the run-up to Christmas
is typically one of the busiest periods of
the year. It is very hard for businesses to
stay afloat when the people they serve
are cutting back their spending. By the
summer and autumn many will have given
up completely and started closing their
doors. We will no doubt hear plenty of
ministers blaming that on an unavoidable
rise in interest rates, and a slowdown in the
global economy. The truth it is that it is the
government that is almost entirely to blame.

City talk
l It’s no surprise that BP
has appointed “the
bloke who has been
sitting in the
boardroom for
three and a half
years already” as
its boss, says Nils
Pratley in The
Guardian. Murray
Auchincloss
(pictured), the former
chief financial officer,
has been with the firm for
over 25 years, and represented
the “continuity candidate”. He
was appointed acting CEO last
September following the
defenestration of Bernard
Looney and will now stay on in
the role. He is “wedded” to
by 2050, despite l “Defensive” is one way of l The idea of cross-selling
investors’ scepticism putting it. “Two drunks financial services to grocery
that green propping each other up” is shoppers was “probably
alternatives will another. Either way, City brokers doomed” from the start, says
generate the Panmure Gordon and Liberum Lex in the Financial Times.
same returns have “opted for a 50:50 all-share Sainsbury’s and Tesco are both
as oil and gas. bunk-up”, says Alistair Osborne seeking to withdraw from
BP trades at a in The Times. But the merger, banking following their late-
stubborn which will produce cost-saving 1990s foray into the sector. But
discount to its synergies, “makes sense”, and as UK challenger banks know all
more “oily” US should deliver more than just too well, building a financial-
peers, and to quell cost savings. The combined services business of scale
doubts BP will need to firm, with more than 250 requires large investments of
achieve an “oil-like 15% corporate clients, will have financial and human capital.
over the cycle” from biofuels access to the funds of its 38% Given that the same is needed
and the like, while avoiding owner Atlas Merchant Capital, to maintain core food
duds. Auchincloss will “feel the and the pair are expecting a businesses, Sainsbury’s and
heat from those who would be better 2024. And, in a City Tesco banks never broke
oily for longer”, but continuity is seeing a dearth of initial public through. Their retreat should
a “reasonable” stance. The offerings, capital raisings and serve as a “salutary lesson to
current strategy is only three deals, it might prove that at least firms that believe they can use
©Getty Images

Looney’s strategy of an years old and “should be given “someone can make money in their brand to conquer other
“orderly” transition to net zero a chance to succeed or fail”. the London market”. capital-intensive sectors”.

26 January 2024 moneyweek.com

 Investment strategy 15

Japan can keep delivering Guru watch

Rajiv Jain,
chief
The world’s second-biggest market MSCI EM Japan hedged and unhedged investment
Net total return in sterling, Jan 2004 = 100 officer,
has rallied strongly, although the 400 GQG Partners
weak yen has hurt foreign buyers MSCI Japan
MSCI Japan GBP Hedged “The survival of
300 democracy has

©Getty Images
Cris Sholto Heaton no correlation with
Investment columnist stockmarket performance,”
200 says Rajiv Jain, the global
and emerging markets
If you were trying to guess – without any other equities investor who
information – the relative size of the world’s 100 oversees $120bn in assets at
stockmarkets, you’d probably expect them to be his US-based firm GQG.
roughly in line with each country’s share of global “South Korea didn’t have fair

Source: MSCI
0 elections until 1993, but the
GDP. If you did, you would be totally wrong.
2004 2009 2014 2019 2024 stockmarket did well for
The world economy will be almost $110trn 30-plus years before that,”
this year, at market exchange rates, according to he tells the latest Barron’s
the latest IMF estimates. The US will be around MoneyWeek’s bullishness on Japan has been roundtable. The same was
$28trn – or 25% of the total. That’s larger than one of its main themes from the start. There have true of Chile and Taiwan.
Europe, but not overwhelmingly – the EU plus been ups and downs, but on a ten-year view, it’s Still, the worsening
the UK and Switzerland and other regional been no disaster: the MSCI Japan has a net total political environment in
economies will be around $25trn. Yet the US is return of 7.75% per year in GBP terms, compared China and its implications for
about 63% of the MSCI ACWI index, which with 5.2% for UK stocks. Yet in recent years the businesses has been a
headache for emerging-
includes both developed and emerging markets. index has surged, but the yen has been weak, and
market investors in the last
All the European markets sum to less than 15%. so the net gain for foreign investors has been low. few years. “The Chinese
Meanwhile, emerging markets are a bit over 40% So we have two important questions. First, can economy is kind of Okay.
of global GDP, yet roughly 10% of the index. the market keep going up, or is this another false The Chinese stockmarket
What does this imply about the main equity start of the kind that investors have got used to isn’t,” says Jain. “Chinese
holdings in the MoneyWeek exchange traded almost since 1990? Well, the market does not look state-owned enterprises are
fund (ETF) portfolio that we’ve been reviewing expensive based on forecast earnings (a forward doing much better than the
in recent weeks? In brief, we are underweight price/earnings ratio of 14). Crucially, corporate private sector. That’s the
the US (we think it’s expensive), we give Europe profitability seems to have made a long-awaited negative part of heavy-
handed intervention in the
a bit more clout, and we have more in emerging structural improvement. Return on capital is
public sector.”
markets (as a share of our overall stock exposure) running at about twice its long-term average and China is now just 5% of
than many portfolios – but nowhere near to their in line with developed-market norms, according GQG’s investments, down
share of global GDP. As discussed last week, we to estimates from asset manager GMO. There’s from 40% last year, says the
want to be optimistic, but not blind to the risks. lots of chatter about attracting new investors (see Financial Times. At this
last week’s issue), but better profitability is the key point, Jain has more money
Profitability up, currency down reason to be bullish (or not) at this point. invested in the much smaller
Then there’s Japan, this week’s subject. Japan Second, given the weak yen, would it be markets of the Middle East,
is 5% of the MSCI ACWI, the second biggest better to hold a currency-hedged ETF, such as such as the United Arab
Emirates, encouraged by a
market after the US, and about 4% of global iShares MSCI Japan GBP Hedged (LSE: IJPH)?
business-friendly approach
GDP. We have 10% in Vanguard FTSE Japan Clearly that would have been smart in hindsight. from governments and plans
(LSE: VJPN), so that is a big overweight as a share However, while I am not in the habit of trying to to diversify their economies
of our core equity holdings (which add up to 40% forecast currencies, I suspect the yen is now cheap away from oil. “There are
of the portfolio) and even as a share of the total and this might be the worst time to hedge. So we’ll massive privatisation hopes,
portfolio (ie, including bonds, cash and gold). stick with the unhedged fund we have. which by definition will open
up the economy.”
account of this by assuming Other emerging markets
I wish I knew what total return was, the investor receives the are also likely to perform
but I’m too embarrassed to ask income after withholding tax
has been deducted.
well. “Countries such as
Indonesia, Malaysia, and
Stockmarket returns are often and price return will usually be Since many tax treaties India are in pretty good
quoted on the basis of price small, unless you are looking at allow for residents of some shape. In Latin America, we
return – the gain or loss in the investments with a relatively but not all other countries to have never been more
price of the shares that make up high yield, such as high-yield reclaim some of the withheld bullish on Brazil. GDP and
the index. However, investors bonds. But over several years, tax, no net return index can equity markets are doing
will also receive dividends from the difference can be large and represent exactly what all well despite little stimulus
most companies and over the total return quickly becomes a investors would have during Covid and high
long term this can amount to a much more meaningful received. It also takes no interest rates.”
much larger element of returns measure of what the investor account of other taxes, such Jain also remains keen on
than the capital gains. earns than price return. as capital gains tax or income US stocks, where GQG’s
The total return from an Total returns may be tax, that the investor might positions include tech stocks
investment takes into account calculated as gross returns or pay. Nor does it include such as Nvidia and Arm in
income received from net returns. Gross total return investing costs. The index the semiconductor sector.
dividends or interest from assumes that the investor calculation must also make “I am not bullish on the
bonds or other sources. Total receives the full amount of any assumptions, such as the economy, but the broad
returns are usually calculated dividend or other income timing of when dividends are market is dominated by
on the assumption that any distributed. This is often received and reinvested, that some of the highest-quality
income received is invested unrealistic, as many countries may be unrealistic. So total companies globally.” But
back into the market. tax dividends at source when return indices are likely to Europe is a “basket case”,
Over a short time frame, the they are paid (withholding tax). overstate what investors due to soaring energy costs
difference between total return Net total return tries to take would have earned. and excessive regulation.

moneyweek.com 26 January 2024

16 Best of the financial columnists
Is this the The New York Times is suing OpenAI for copyright infringement, arguing Money talks
that its ChatGPT chatbot is causing it “serious economic harm”. However,
end for the there is a “much more important issue that has been ignored”, says James
Ball. While there are grounds for media companies to be compensated if
“I’m still renting.”
Actress Ayo
Edebiri
internet? their newsgathering is being “monetised by big tech”, artificial intelligence
(AI) is essentially doing what many journalists do: reading articles online
(pictured)
on how
James Ball and writing their own version. “To ensure AIs never generate particular she stays
The New European sentences” would require a central database of copyrighted information, grounded
which doesn’t exist. What really does matter is how AI is muddling things up after her
and producing nonsense. For example, AI has “collapsed the context gap” Emmy award
win for The
between fudge and the Harry Potter novels’ Cornelius Fudge, so that fudge
Bear, quoted in
recipes online now reference “scrimgeour” (Rufus Scrimgeour is Fudge’s Vanity Fair
successor). Donald Trump’s former lawyer had to apologise to a court after
citing non-existent cases found for him by AI. As new generations of AI are “I felt that I was getting
increasingly “trained” on low-quality, inaccurate AI content, a “dangerous money for old rope at
cycle” could emerge in a process dubbed “ensh*ttification”, which risks ITV, really. I was not
reducing the internet to an “algorithmic grey goo”. really doing very much,
but being paid quite a lot
of money. But that was

Will India India is on investors’ radar, but its path is unlikely to resemble China’s,
say Megha Mandavia and Nathaniel Taplin. Although it’s increasingly
their choice... to pay me
that much.
I took it gladly and I’m
be the next favourable dependency ratio due to population growth should theoretically
keep labour costs in check and allow for greater levels of savings, a
now living off it.”
Sports presenter
Asian tiger? “host of barriers” still make it hard to “connect workers with employers”.
Only a third of Indian women work and “hefty” subsidies for agriculture
Des Lynam, quoted in
The Telegraph
Megha Mandavia have skewed improvements away from “labour-hungry urban factories” to
and Nathaniel Taplin the countryside. Low labour participation makes it harder for households “I’m incredibly fortunate.
The Wall Street Journal and companies to build up the savings needed for the “investment booms I don’t set my own
pay, that’s set by
that transformed East Asian tigers”. High barriers to trade are another
our remuneration
problem. India’s “boisterous democracy” has led to “people-pleasing committee. You can’t
protectionist measures”. India’s large public debt (around 85% of GDP) justify a salary of that size.
and rising state expenditures are also putting pressure on the public purse It’s a huge amount
at a time when heavy investment in infrastructure is needed. India needs the of money to anyone
help of outside investment. If it is to match those Asian tigers, unless it can looking at it.”
“truly supercharge” manufacturing foreign direct investment, it will need British Gas’s boss
to ease labour-market bottlenecks and reduce trade barriers. Chris O’Shea on his £4.5m
pay packet last year,
quoted on the BBC

Global trade Geopolitical shocks and underperforming major exporter economies have
given rise to talk of deglobalisation over the past year, but the narrative
“We are living in a second
‘Gilded Age’. Billionaires
returns to is “overdone”, says Barry O’Byrne. Yes, firms have been trying to make
their supply chains more resilient and sustainable, but a bit of judicious
are wielding their extreme
wealth to accumulate
past peak near-shoring does not mean they “are becoming less international”. In
fact, according to the World Bank, last year’s global trade-to-GDP ratio
political power and
influence, simultaneously
Barry O’Byrne of 74% exceeded pre-Covid levels. HSBC estimates that global exports of undermining democracy
Nikkei Asia goods and services will grow 1.8% this year and 3.4% next. Long-term, and the global economy.
It’s long past time to act.
the signs are that there will more global connections, not fewer. Significant
If our elected officials
international trade initiatives are under way while greater investment in refuse to address
digitisation is “removing barriers to cross-border trade and payments”. this concentration of
More broadly, as governments “ramp up subsidy programmes” to money and power, the
decarbonise their economies, there are opportunities for green-technology consequences will be dire.”
hubs to deliver products to the world. In short, there is complexity; there Actor Brian Cox, who
always has been. Businesses will increasingly need to consider the impact of played fictional billionaire
climate change on operations. But there are also opportunities. As ever, an Logan Roy in Succession,
“agile, eyes-open approach” will be the best “guarantor of success”. quoted in The Guardian

“I am uncomfortable
growing Tesla to be
The soaring Even drivers with long records of accident-free motoring face “sudden
jumps” in the cost of their insurance, says John Gapper. The average annual
a leader in AI and
robotics without having
cost of car quote rose by more than 50% to £995 last year, with 17-year-olds being
quoted an average of £2,877. Insurers may not be “above price gouging”,
25% voting control.
Enough to be influential,
insurance but they do also face rising bills for injury compensation and repairing
vehicles (not least due to the costly sensors and electronics in modern cars).
but not so much that
I can’t be overturned.
One way to lower costs – aside from a good credit score and a low-risk Unless that is the case,
John Gapper
I would prefer to build
Financial Times job – is to install a black box in your car, which monitors your speed and
products outside of Tesla…
how sharply you brake or turn corners. But this won’t help a “young driver Tesla is not one start-up,
with a poor credit score, living in a rented flat in a town where one has to but a dozen… At 15% or
drive for work”, and this in turn has “severe economic consequences” and lower, the for/against ratio
“reinforces the reality that financial products are more expensive for the to override me makes
people who most struggle to afford them”. Politicians are “rightly worried” a takeover by dubious
about this and insurers are pushing for cuts in insurance-policy taxes. interests too easy.”
In the meantime, as costs rise, even though most people would prefer not to Tesla’s CEO Elon Musk,
©Getty Images

be monitored, the “incentive for good drivers” to use black boxes will grow, quoted on social-media
platform X
“as will the penalties for being left behind in a bad risk pool”.
26 January 2024 moneyweek.com
 Best of the blogs 17

The new green The Global South won’t listen to the doomsday cult

imperialists
unherd.com
Capitalism is destroying
the planet and “degrowth
communism” is the only way
to save us from extinction.
That, at least, is the argument
of Kohei Saito, the “rising
star of contemporary Marxist
thought”, whose Slow Down:
developed West was the model
towards which the whole world
was moving, and embracing
instead the “archaic, steady-
state, communal societies” of
the pre-capitalist world.
Perhaps Saito is right about
that, but he is blind to his own
“Eurocentrism”. Although he

How Degrowth Communism
Can Save The Earth was a
bestseller in Japan and has
just been published in English.
The idea, says Thomas Fazi, is
radically to reorganise society
to eliminate mass production
and consumption, replace
production for sale with
production directly for use, and
decarbonise the economy.
Most Marxists would reject
the part of this vision that
repudiates mass industrial
production, but Saito claims
that Marx himself was moving
towards such a position
towards the end of his life,
rejecting his old idea that the
©Getty Images
claims to speak on behalf of
the “Global South”, in truth
his concerns reflect a “very
particular worldview”: that of
relatively affluent Westerners,
especially youngsters of the
millennial and Z generations.
His “apocalyptic, doom-laden”
approach to the climate is “at
odds with climate science itself”,
and is a specifically Western
phenomenon. That makes some
sense, as material needs have
largely been met in the West,
and so people have started
searching instead for meaning,
finding it in post-apocalyptic
doomsday cults such as the
green movement.
The billions of people who
still live in extreme poverty,
and the millions who don’t
even have access to electricity,
have other ideas. For most
people on the planet, climate
change “systematically ranks
among the lowest policy
priorities”, well below more
pressing concerns, such as
hunger, poverty, access to
water, sanitation and education.
“Degrowth” is unlikely to be
very appealing to such people.
Saito’s “Western eco-
imperialism” also ignores
that the balance of power has
shifted. The Global South is
no longer a “powerless victim
of Western imperialism”, but,
thanks to fossil-fuel-powered
capitalism, a power in its
own right, with its own ideas
about the best way forward.
Degrowthers would rather have
the masses of the Global South
languish in a state of poverty
than see them develop their own
productive forces. “As it turns
out, developing countries have
no intention of pandering to
Western middle-class concerns.”

Why Davos Man sounds dumb

politico.com
Can Milei make
Argentina great?
betonit.substack.com
Listen in on the conversations at the World Economic Forum in Davos, a shindig for the world’s Javier Milei promises to
business and policymaking elites, and you’ll be struck by one thing, says John Harris: just how similar transform Argentina from
they are to the chat you had with your neighbour at a party or colleague at work. Just look at the crazy “severe underperformer”into a
choices available in the US election! What’s going on with all this woke nonsense at universities? Why “beacon of laissez-faire
capitalist prosperity”, says
can’t the youth of today think clearly or deal with opposing views? Isn’t artificial intelligence scary? Bryan Caplan. Will he succeed?
“And so it goes: deep, billowy drifts of alpine conventional wisdom and smart-set cliché.” What unites For all his rhetoric, Milei’s
all the people at Davos is that they consume a lot of news journalism. Once upon a time that would policies are little different from
have made you a bit unusual, if not “arrestingly smart” or more likely to “know the score”. But with what anyone seeking to heal an
the rise of social media, “insights or alleged insights into the deeper meaning or future course of events economic crisis would do. He is
have been radically decentralised”. At the same time, even the smartest people are vexed by the same going to slash monetary growth,
issues in modern life, and yet struggle for any great insight as to what to do about them. “That may be cut government spending and
the real lesson of Davos: everyone is winging it, experts and schlubs alike, muddling through with at raise taxes. Yet he has a broader
best fragmentary understandings of a fast-moving world and its inscrutable future.” free-market agenda too. Ten
days after taking power, he
issued an emergency decree to

How not to In the meantime, plenty of

work has been going on: the
Just to print out the pages
would cost you £45,000 in ink.
relax regulations and open the
door to privatisations. The crisis

build a tunnel planning application runs to

capx.co
The Dartford Crossing under
the Thames is one of the
most congested roads in
Britain, says Ben Hopkinson.
The plan to relieve it with a
new tunnel has now been in
the works for 15 years and –
despite support from locals
who will get cleaner air,
and the project being
designated a national priority
359,866 pages. To read all
National Highways has spent
more than £267m preparing
management is likely to work, as
it has in the past. But that
Argentina, just a cut above
94,534,273 words would them – a sum that in Norway Venezuela and Cuba in terms of
take all year, would have been enough freedom, can become a “bastion
assuming we to actually build the of free-market policies”, is far
read for 24 Eiksund Tunnel, the less likely. Milei’s party has a tiny
hours a day deepest undersea tunnel share of seats in the legislature,
without taking in the world when it was and his allied parties are less
a break. If you built, which went from libertarian. That’s a shame,
printed out all idea to construction in because “shock therapy” of
the kind he favours does
of those pages just three years. The “work wonders”. The countries
and stacked Dartford tunnel is that embraced it in the 1990s
them up, they likely to cost £9bn “are vastly better-off today as
would be as tall in comparison – a result”. Those that were
©Getty Images

13 years ago – spades are still as eight double- and won’t be with us more cautious are “stagnant
not in the ground. decker buses. for at least 17 years. by comparison”.

moneyweek.com 26 January 2024

18 Cover story

Invest in treatments for

the ailments of old age
Seeing, hearing and remembering all become more difficult as we reach our dotage. But we are close to
big breakthroughs in the eye care, aural health and Alzheimer’s sectors, says Matthew Partridge
Life expectancy has increased markedly worldwide
in recent decades. Since 1970 it has risen by nearly ten
years in the UK and 20 years in China. Dan Boardman-
Weston, CEO and CIO at BRI Wealth Management,
notes that the UN expects average life expectancy to
reach 90 by 2100. However, the quality of life in later
years can be miserable. In Japan, for instance, “more
adult nappies are sold... than baby ones”, he says.
Of course, “there have always been people with
chronic health conditions, such as coal miners with
emphysema”, says Tim Leunig, visiting professor in
practice at LSE’s School of Public Policy. However,
“as we conquer many of the causes of early death –
road collisions, industrial injuries, heart disease, and
increasingly cancer – more of us will reach the age
where parts of us literally wear out”. Three conditions
in particular stand out: deteriorating eyesight, hearing
problems and Alzheimer’s.
Huge commercial potential
The problem of chronic age-related conditions is
particularly stark. They reduce the quality of life of
those affected and make it harder for people to be
economically active or care for themselves. Sufferers
thus need additional care, which can be “massively
costly for society”, says Leunig.
accidents and generally have better mental health”. This
in turn reduces the amount that society needs to spend
on social care and hospital visits.
One way in which the medical profession is helping
people preserve their eyesight for longer is through
preventative healthcare. Patel thinks that in recent
years patients have become more aware of age-related
eye problems, such as glaucoma, and “are now much
more willing to present themselves at an earlier stage
for monitoring”.
Advances in technology are also helping opticians
on the high street to carry out many of the checks that
could previously only be done by doctors. And future
developments in artificial intelligence (AI) mean
that in a few years’ time “we will be able to review the
images of patients’ eyes a lot more quickly, spotting
changes over time”.
Keep an eye on AI
Ben Peters of fund management group Evenlode
Investment agrees. He notes that for nearly a decade
Google has been working with Moorfields Eye Hospital
to apply machine learning to diagnostics, with the
result that “we are close to developing a system that
can automatically detect around 50 eye diseases” and
imaging systems so detailed that they can produce

©Getty Images
And this is taking place at a time when “the fall in snapshots of individual blood vessels in the eye.
the birth rate across the developed world means that There are even start-ups working on the idea of
there are fewer people of working age supporting each embedding diagnostic devices within people’s glasses,
pensioner”. This combination of higher costs and fewer so they could automatically detect problems with
people to meet them means all governments are in big wearers’ eyes, although this is still a long way off.
financial trouble. Peters also notes that there have been some major
While the need to prevent people becoming unable advances in treatments. For instance, several drugs
to care for themselves is clearly a challenge for society have now been approved for age-related macular
as a whole, it also presents an opportunity for the degeneration, the most common cause of blindness in
biotechnology and medical-technology industries, says the industrialised world. Of these, the most promising is
Leunig. Any drug company or medical-device maker Roche’s Vabysmo.
“that invents either a cure, or a way to slow down the Meanwhile, Newcastle University has developed
development of these conditions” will not only “have several promising adult stem-cell treatments that
created something socially very valuable, but will [also] have already been used to restore the sight of patients,
be able to sell their product for significant sums to including one whose eyesight was lost owing to
governments around the world”. chemical burns. Other teams are working on the idea of
You could even argue that it doesn’t matter developing contact lenses that can inject stem cells into
what price companies will be able to charge for eyes to reverse ageing-related damage.
individual treatments: even if government pressure Dan Chancellor, director of thought leadership at
and competition bring down prices, the “sheer size of Citeline, which provides commercial intelligence for the
the market” for these conditions is so large that any global life-sciences industry, thinks that the combination
company capable of alleviating them will make large of an ageing population and new treatments should help
sums of money in any case, Leunig notes. He thinks this the market for ophthalmology drugs grow from $20bn
area “has the unambiguous potential to lead to many a year to around $27bn within the next four years. No
multiple billion dollars of profit”. wonder the big companies that currently dominate this
area, such as Roche, Bayer and Novartis, are investing
“In future, Fading vision large sums of money not only into “researching new
treatments, but also to licensing, or buying outright,
diagnostic Problems with eyesight can significantly reduce older
people’s quality of life. However, if we can find ways new therapies from smaller biotechnology companies”.
devices in to help people retain (or even in some cases improve)
glasses should their eyesight, it can “greatly boost their ability to be Hearing loss
independent”, says Paresh Patel, the CEO of OCL Hearing also declines with age. This is important,
be able to Vision, which provides private eye-care services ranging since several studies “have linked hearing loss to
monitor from laser-eye surgeries to cornea transplants. Those
successfully treated “can do a greater range of daily
future dementia”, says Lawrence Lustig, a surgeon at
Columbia University Medical Center – possibly because
people’s eyes” chores, are more mobile, have a much lower risk of... it reduces the amount of mental stimulation people
26 January 2024 moneyweek.com
Opticians can now carry out many of the checks that were previously the preserve of doctors
get, as well as making them less likely to socialise.
However, the demand for better hearing has made this
area “increasingly lucrative” for companies, resulting
in new treatments and research that may bear fruit in
the next decade.
Lustig thinks that the biggest recent change has
been the decision 15 months ago by the US Food and
Drug Administration (FDA) to allow those in the US
to buy hearing aids over the counter without a need
for a prescription. This increased convenience will
encourage the millions of Americans who suffer from
mild to moderate hearing loss, but who aren’t using
a hearing aid, to consider getting one, which will
provide a massive boost to the market.
Other treatments that haven’t yet reached the
market, but are in advanced stages of development,
include totally implantable cochlear implants, says
Lustig. Like traditional cochlear implants, these help
people with more severe hearing loss, but don’t involve
any permanent external components (an external
charger is used at night to recharge the battery).
This reduces the potential for accidental damage to
the implant, as well as making it less conspicuous.
However, while hearing-loss treatments are
currently dominated by medical devices, the
biotechnology industry has also been working on
some interesting drugs. While the most promising
treatments at present are for congenital hearing loss
brought about by problems with the otoferlin gene,
which affects all ages, researchers are also working
on molecular therapies designed to help stimulate the
repair of cells in the inner ear, says Lustig. While such
moneyweek.com
work is current at the laboratory stage, Lustig hopes
that within the next decade “we may be able to regrow
“Biotechs
enough cells to delay age-related hearing loss... it is a have been
truly exciting time to be involved in this area”.
working on
Approaching Alzheimer’s treatments
Perhaps the condition that is causing the medical
profession and world leaders the most anxiety is
to stimulate
Alzheimer’s, which currently affects an estimated 450 the repair of
million people around the world. While its ability to
rob sufferers of their memories, independence and
cells in the
personality has been well documented, we still “have inner ear”
a poor understanding of the disease”, says Marek
Poszepczynski, joint lead manager of the International
Biotechnology Trust. Humanity’s knowledge “of the
basic mechanisms around other conditions, such as
cancer, has advanced in leaps and bounds, [but] when
it comes to the brain and Alzheimer’s we still haven’t
mastered the basic biology”.
As a result, it is perhaps not surprising that until
recently Alzheimer’s has been a “graveyard” for drug
companies. The good news is that this is starting to
change; witness the approval of the first wave of drugs
that seem to have an effect on the progression of the
disease rather than simply masking the symptoms.
These drugs work by using antibodies to target and
clear plaques, which form when protein pieces called
beta-amyloids clump together and block the synapses
in the brain. Nonetheless, clearing plaques “only slows
the rate of decline rather than completely halting it or
Continued on page 20
26 January 2024
20 Cover story
Continued from page 19 “There
reversing it”. This means that “there is something else
are now
involved, which we need to work out”. In addition 300 drugs
to being only moderately effective, the current
treatments require patients “to make frequent trips to
designed
hospital to receive the medication via an IV infusion”, to combat
notes Craig.
Moreover, they also come with major side effects,
Alzheimer’s
such as haemorrhages. Still, “being able to keep in the global
patients out of a nursing home for even just six months
represents a huge saving in social-care costs”.
pipeline”
Citeline’s Dan Chancellor predicts that the market
for beta-amyloid antibodies alone will be “worth an
annual $7bn by 2028”. What’s more, he hopes that
this early success “will catalyse further investment
and novel therapies”. The Alzheimer’s pipeline
contains more than 300 drugs in clinical trials,

although “only a small fraction of these” are likely to
be successful.
Thomas McGarrity, head of equities at RBC Wealth
Management, agrees with this. While he warns that
Alzheimer’s (and dementia in general) remains a
“high-risk area”, he thinks that there are “significant
market opportunities for biopharma companies with
nascent therapies”.
One person involved with one of those drugs that
is at a late stage in its development and who is
bullish about the future of Alzheimer’s treatments is
Martin Tolar, the founder of biotech firm Alzheon.
Instead of targeting insoluble and relatively inert
amyloid plaques, Alzheon’s flagship drug ALZ-801/
valiltramiprosate prevents the formation of neurotoxic
soluble beta-amyloid oligomers, which are believed
to play the main role in injuring and killing neurons,
leading to brain damage that ultimately manifests
itself as Alzheimer’s.
By targeting this “toxic pathway” with a pill that
can be taken at home, the disease’s progression can be
tempered. It can even be prevented from advancing to
the terminal clinical stage. In effect, this treatment will
“allow the brain to flush out the junk that normally
starts to accumulate after the age of around 40
©Alamy
In the US, hearing aids can now be bought over the counter
and that forms the toxin causing Alzheimer’s”.
Data from clinical trials suggest that ALZ-801/
valiltramiprosate does indeed affect disease
biomarkers and slows down the progression of
the disease for those with a particular genetic
predisposition to Alzheimer’s in around 60%-70%
of cases.
Furthermore, the ALZ-801/valiltramiprosate pill
does so with far fewer side effects than existing drugs.
Tolar expects to file for approval from the FDA later
this year. He aims to bring his treatment to the US
market in 2025 and to the EU the following year.
He also believes that once the idea of targeting
beta-amyloid oligomers is clinically validated, doctors
will be able to “identify patients at risk and with active
disease over a decade before clinical symptoms start
to appear”.
Overall, Tolar is confident that “we’re finally at
the dawn of being able to treat Alzheimer’s
effectively”. This is important, given “that nearly
everyone I’ve talked to has been touched by the disease
in one way or another”.

What to buy now

Biogen (Nasdaq: BIIB) makes aducanumab
(Aduhelm) and lecanemab (Leqembi),
which are the only two Alzheimer’s
treatments licensed to treat the progression
of the disease. While aducanumab’s
approval by the US Food and Drug
Administration in 2021 was controversial,
given the ambiguous data over its efficacy
and concerns about side effects, early
indications are that lecanemab, which has
been approved in the US, EU and China, is
more effective in slowing clinical decline.
Biogen already has several successful
drugs on the market and trades at only
15.8 times 2024 earnings.
Another treatment that looks promising
is donanemab, developed by Eli Lilly (NYSE:
LLY). Data from the final stage of the clinical
trial suggested that it could slow the
progression of the disease faster than the
two existing drugs on the market, allowing
patients to maintain independent lives for
longer. As a result, it is likely to be approved
early this year, although it also comes with
significant side effects. While Eli Lilly trades
at a much more expensive 2024 price/
earnings (p/e) ratio of 52, this is more than
justified by the success of other blockbuster
drugs in its portfolio, such as anti-obesity
drug Zepbound.
The dominant player in the vision-care
industry is EssilorLuxottica (Paris: EL),
formed from the merger between lens firm
Essilor and eyewear producer Luxottica six
years ago. It owns several fashion brands
and is also the sector’s lowest-cost
producer, which further enhances its
pricing power. The group has also started
to invest in new subsectors, such as smart
glasses (for use with virtual- or augmented-
reality gear). Evenlode’s Ben Peters is
impressed by its new range of glasses,
which are designed to slow the progression
of myopia. While the company trades on a
2024 p/e of 25, strong growth prospects
mean that this multiple looks justified.
Alcon (NYSE: ALC) focuses on five
areas of eye care. It is one of the world’s
largest manufacturers of contact lenses
and makes ocular-health products including
eye drops. It also produces a wide range of
devices and equipment used in surgical
procedures, including implantable lenses.
Sales growth of between 8% and 10% a
year and strong profit margins more than
justify a 2024 p/e of 25.
Biotechnology company Regeneron
Pharmaceuticals (Nasdaq: REGN) makes
aflibercept, one of the few approved
treatments for wet age-related macular
degeneration and eye diseases induced by
diabetes. Last year Regeneron acquired
Decibel Therapeutics, which was
developing several promising hearing-
loss treatments that are now part of
Regeneron’s pipeline. Regeneron trades at
25 times 2024 earnings.
A purer play on the growth of the hearing
sector is Australian firm Cochlear Limited
(Sydney: COH), which accounts for 60% of
all cochlear implants worldwide. Sales of
accessories and upgrades to the processor
in the implant yield recurring revenue
streams. The growing willingness of both
public and private healthcare systems
around the world to cover the cost of
cochlear implants provides ample scope for
growth. Rising demand in emerging
markets, which account for 20% of revenue,
are another headwind. At present it trades
at around 42 times 2025 earnings.

26 January 2024 moneyweek.com


Bargains in commercial property
Rebounding real-estate investment
trusts offer good value, says Max King
A prime beneficiary of the recent fall in interest rates,
which has seen the yield on ten-year gilts fall from
4.8% in the summer to below 3.5%, has been the
commercial property sector. Property valuations are
based on the stream of rental income they generate,
discounted to the present day by the risk-free interest
rate: the yield on long-dated gilts.
In addition, the appeal of real estate investment
trusts (Reits) is their high dividend yield relative to that
available on gilts, so a fall in gilt yields makes them
more attractive. Reits are listed companies that invest
in property. Provided they distribute at least 90% of
their income, and as long as rental income constitutes
at least 75% of their profits and assets, they are
exempt from corporation tax.
This avoids the double taxation that would
otherwise apply: first corporation tax on both income
and capital gains, then income tax on shareholders’
dividends. Instead, only investors are taxed. With
corporation tax recently having been raised from 19%
to 25%, there has been an increased incentive for
conventional companies to convert.
Since Reits were introduced in 2007, existing
companies such as British Land, Land Securities
and Segro converted to Reits and many new Reits
were launched. In fact, few property companies –
mainly those wishing to use more debt in their capital
structure than the Reit rules allow, or to focus
on development rather than property rental – are
not Reits.
Deep discounts
The office and retail sub-sectors were hit hard in the
pandemic and the muted subsequent recovery was
then snuffed out by the rise in gilt yields. Companies
in the logistics, warehousing and industrial sector
that continued to prosper during Covid, such as
Segro, were hit all the harder by the gilts sell-off.
Only a few specialist firms fell by less than 50% and
some by much more. Hammerson, once a FTSE-100
constituent, fell by nearly 90%.
The discounts to net asset value (NAV) at which
shares traded reached 50% in the case of British
Land, 40% for Land Securities and 30% for Segro.
Even high-quality specialists, such as PHP, Assura and
Big Yellow, reached discounts of around 20% at the
end of October.
In the subsequent recovery, discounts have declined
by 10% or more. The rise in discounts mirrored
the private-equity sector, but whereas valuations
in the private sector mostly held up or rose, in the
property sector they fell. The NAV per share for
Unite Group (LSE: UTG)
Share price in pence
1,400
1,200
1,000
800
600
2020 2021 2022 2023
moneyweek.com
Opinion 21
©Shutterstock
The departure of HSBC will pose a challenge for Canary Wharf
sector bellwether Land Securities fell by 12% in the
year to 31 March 2023 and by another 4.6% in the
subsequent half year.
Still, investors were too pessimistic, as the recent
recovery in the sector’s share prices shows. NAVs can
be expected to stabilise, if not start to recover. The
return to the office continues, the retail sector is seeing
steady growth and logistics continues to grow.
Property development in recent years has been
restrained so there is no glut of quality office, retail or
industrial space – although, as always, poor-quality
buildings in the wrong location are struggling to find
tenants. HSBC and law firm Clifford Chance leaving
Canary Wharf for the City poses a challenge for Canary
Wharf, but a forecast vacancy rate of 15% represents a
cyclical downturn, not property-Armageddon.
The sector’s recovery has facilitated the merger
of LondonMetric and LXi Reit to create the fourth-
largest Reit and, with a market value of nearly
£4bn, a possible FTSE 100 constituent. LXi had
absorbed Secure Income last year and LondonMetric
acquired CT Property Trust earlier this year, but
there is talk of “synergies” from “complementary
strategic approaches.”
LondonMetric’s dividend yield of over 5% is
undoubtedly attractive and LXi’s of over 6% even more
so, but discounts to NAV of 6% and 10% represent no
bargain, and talk of synergies sounds over-optimistic.
Nevertheless, there is plenty of value elsewhere in
the sector. Share prices may have rallied, but the risks
have lessened. The London specialists Great Portland
Estates (LSE: GPE); Derwent London (LSE: DLN);
and Shaftesbury Capital (LSE: SHC) still trade on
discounts of around 45%. But Unite (LSE: UTG), the
UK leader in student accommodation, is arguably just
as attractive on a discount of a mere 8%.
“The cross- There are, though, the two important caveats of
party war on economic and political risk. The UK has become
a no- or low-growth economy, which must limit
landlords in the potential for growth in demand and in rental
the residential income. The war on private-sector landlords in the
residential sector is a cross-party consensus that could
sector could easily be extended to the commercial sector. The
be extended tax advantages of Reits are not irreversible; double
taxation, the disallowance of interest expense against
to commercial tax, penal rates of stamp duty and enterprise-stifling
2024 real estate” regulation could spread here too.
26 January 2024
22 Funds

Stick with these safe trusts in 2024

Personal Assets and Capital Gearing have had a poor year, but remain solid picks
entering the year with a multi-
Rupert Hargreaves
Investment columnist year low allocation towards
equities in their portfolios,
this was a sensible decision

P ersonal Assets Trust

(LSE: PNL) and Capital
Gearing Trust (LSE: CGT) call
based on what we knew at
the time. What’s more, the
performance of the index-linked
themselves wealth-protection bonds in the portfolio does
trusts. They both aim to protect not reflect the long-term value
and grow shareholders’ capital these assets offer. Locking in
– in that order. However, inflation plus 2.5% for the next
last year was a painful one couple of years is an attractive
for investors in both, with proposition, even if you think
Personal Assets returning inflation is going to fall sharply
0.7%, or 3% on a net asset in the coming years.
value (NAV) basis and Capital This year is likely to be a
Gearing returning -3.3%, or better year for both companies
1.3% on a NAV basis. Both as the market is pricing in
trusts suffered from a decline interest-rate cuts in the second

in investors’ confidence, which
led to a rise in the discount. In
Capital Gearing’s case, this was
compounded by a problem with
its discount-control mechanism,
whereby it had to limit the value
of shares being repurchased
to control the discount while
waiting for regulatory approval
to unlock the additional
profit reserves required to
fund large repurchases.
Index-linked bonds slide
The two trusts suffered last year
thanks to their high exposure
to index-linked government
bonds. Both ended the year
with 50% of assets invested
in US and UK index-linked
government bonds as a hedge
against rising inflation. Index-
linked government bonds
do provide a hedge against
inflation, but they trade like any
other bond. Their value can rise
and fall with interest rates, and
Wind-farm operator Greencoat UK Wind is among Capital Gearing’s holdings
longer-duration bonds are very
susceptible to changes in interest
rates. All longer-duration bonds
took a hit last year as interest
rates increased, and index-
linked bonds were no different.
As Sebastian Lyon, manager
of Personal Assets, noted in
the trust’s fourth-quarter
investment update, Personal
Assets’ index-linked holdings
neither made nor lost money
overall in the nine months to the
end of October, a performance
that was “a little disappointing”.
Still, the long-term outlook
for these assets remains
attractive, especially if inflation
stays high in the years ahead.
That’s why Personal Assets
was adding to its holdings,
buying both UK and US short-
term index-linked bonds with
positive real yields of over 2.5%
©Getty Images
and over 1.5% respectively,
locking in returns at these levels
plus inflation (if inflation is
3.5% in the US, that will give a
return of 6% annualised until
2026). As Lyon noted, “this is
attractively priced, government-
backed protection against
ongoing inflationary risks”.
Meanwhile, Capital Gearing
was busy picking equities
with inflation-linked cash flows
last year, including the likes
of PRS Reit, which provides
privately rented housing, and
Greencoat UK Wind, the wind
farm operator.
Investors may be tempted
to give up on both trusts after
a terrible year in which they
underperformed cash and
dramatically underperformed
equities, especially US ones. But
while they both made an error
half. Rate cuts will be positive
for bond prices, especially
longer-duration bond prices,
removing what has been a
major headwind for both
trusts’ portfolios in 2023.
Falling interest rates will also be
positive for equities. Both trusts
have around a quarter of assets
invested in equities.
On the other hand, if
inflation picks up again and
interest rates remain elevated,
the two trusts may face another
difficult year. But this would
be a shock to equity markets
in general. If interest rates do
remain elevated, equity markets
are likely to see a sell-off, and
considering the defensive
positioning of both Personal
Assets and Capital Gearing,
they would avoid the worst of
the pain. After a tough 2023,
investors should not give up on
these trusts as we head into a
new year of uncertainty.

Activist watch Short positions... ESG bubble keeps hissing air

Media and entertainment giant
n The backlash against environmental, social n Investors were excited when the US
Disney has formally rejected board
and governance (ESG) investing is gathering Securities and Exchange Commission
seats for activist investor Nelson Peltz
pace. In the second half of 2023 only six funds (SEC) greenlit its first US bitcoin
and former Disney chief financial
prioritising ESG were launched worldwide. exchange-traded funds (ETFs) earlier
officer (CFO) Jay Rasulo, says
Former ESG champion BlackRock said this week this month. More than $4.6bn of shares
Reuters. Peltz’s Trian Fund
that it will prioritise “financial resilience” amid in ten spot-bitcoin ETFs changed hands
Management insists that Disney has
high interest rates, and worries over artificial last Thursday. But asset manager
been underperforming despite
intelligence (AI), during discussions with Vanguard will not offer the ETFs on its
“unrivalled customer loyalty” and
investee companies, rather than ESG concerns, brokerage platform, says The Wall
“irreplaceable intellectual property”.
says the Financial Times. BlackRock manages Street Journal. It is concerned that they
The likes of Disney have been
more than $48bn of ESG assets and controls two are not suitable for individual investors.
struggling to make money from
of the five biggest American ESG funds. The It says they “do not align with our offer
streaming and adapt to the decline in
2024 annual report from the world’s largest focused on asset classes such as
traditional TV viewing. Disney is also
asset manager dropped references to “global equities, bonds, and cash”, which are the
contending with box-office flops and
warming” and the two-degrees centigrade “building blocks of a well-balanced,
legal battles with the Republican
global temperature benchmark. BlackRock has long-term investment portfolio”.
governor of Florida, Ron DeSantis.
become a “punching bag” for politicians, says Vanguard’s stance has angered some
Disney says it is undergoing
Morningstar’s Greggory Warren. The US state of investors, such as Neil Jacobs from
restructuring, while Peltz has “not
Tennessee recently sued it for allegedly financial services group Swan Bitcoin,
actually presented a single strategic
misleading consumers about the scope and who is planning to dump Vanguard for
idea” and lacks experience in media.
effects of ESG when investing. another broker.

26 January 2024 moneyweek.com

 Trading 23

IG Group is worth a punt How my tips

have fared
The spread-betting and online-trading specialist is growing and still cheap My eight long tips have
disappointed in the last
fortnight, with five
Matthew Partridge declining. Computer-
Shares editor services firm
Computacenter rose from
2,742p to 2,830p. Moonpig,

I n the mid-2010s, the regulations governing

financial spread betting underwent a major
overhaul. Previously largely unregulated,
which sells greeting cards
and gifts online, appreciated
from 152p to 161p and
the sector was brought under the aegis of the kitchen supplier Howden
Financial Conduct Authority (FCA), the City Joinery advanced from 781p
regulator, which announced strict rules relating to 785p. However, budget
to the amount of leverage that people could use, airline easyJet fell from
509p to 500p, luxury retailer
in addition to rules to prevent people incurring Watches of Switzerland
unlimited losses (as had occurred in a few collapsed from 660p to 384p
prominent cases). As you might expect, this (which triggered the stop-
caused shares in spread-betting firms to crash loss at 550p) and discount
almost overnight, with some analysts predicting retailer B&M European

©Getty Images
that the sector wouldn’t survive. However, some New regulations have done little Value Retail declined from
firms have not only survived but thrived. to dampen enthusiasm for spread betting 559p to 523p.
One of these is IG Group (LSE: IGG). Despite Recruiter SThree
the fact that its shares fell by a third when the investing money in financial technology while dropped from 399p to 381p
and aircraft concession
first series of new rules was announced in pursuing expansion outside the UK. It has owner SSP slid from 223p to
December 2016, and then fell back again when launched a US subsidiary. This should ensure 220p. Overall, counting my
a second wave of restrictions emerged two years that its rapid growth will continue into the losses on Watches of
later, they have since bounced back. The rules, medium term. Switzerland, my long tips
which in retrospect proved quite reasonable, IG Group also looks attractive from a are making a profit of £715.
appear not to have been a significant deterrent valuation perspective. Thanks to a strong return By contrast, my short
for punters. At the same time, the pandemic and on capital employed (ROCE, a key gauge of tips did well, with five out
the cryptocurrency boom seem to have attracted profitability) of around 20%, it can continue to of the six going in my favour.
a new generation of people to the company’s invest in expansion while still paying a strong Payroll technology-provider
Paycom fell from $203
platform. IG Group’s dividend, which has to $192, solar-energy
revenue has grown “The pandemic and crypto- risen consistently for company Sunrun went
consistently in each of the past two years down from $16.74 to $14.68
the past four years and currencies have attracted new after being frozen. and online brokerage
is now double the total punters to the platform” IG Group’s stock Robinhood declined from
reached in 2019. is nonetheless still $12.42 to $10.99.
priced at a bargain-basement seven times 2025 Video-game store chain
A headwind from higher rates earnings, with a dividend yield of more than 6%. GameStop slipped from
The momentum will subside to some extent. For The stock charts also seem to suggest that $15.58 to $14.68, while air-
taxi firm Joby Aviation lost
instance, like many financial firms, IG Group sentiment on IG Group has turned bullish. ground from $6.37 to $5.87.
has benefited from the rise in interest rates. After falling by a third between April 2021 and The only exception was
Income earned on customers’ cash balances October 2023, the shares have rallied strongly, used-car seller Carvana,
rose 100-fold in the year to 31 May 2023, from rising by 20% in the last three months. They are which rose from $40.56
£800,000 to £80m. With customers starting to trading above both their 50-day and 200-day to $48.24. Overall, my
shop around and rates coming down, this source moving averages. I therefore suggest that you go shorts have gone from
of revenue will almost certainly decline. Still, long at the current price of 766p, at £4 per 1p. losing £5 two weeks ago to
IG Group has vigorously pursued a strategy of In that case, I recommend a stop-loss at 526p, making £941.
both geographical and product diversification, which gives you a total downside of £960. My combined long and
short positions are making
profits of £1,656, up from

Trading techniques....US elections £1,170 in my last update.

A recurring theme among
traders is how the presidential
cycle affects the US
stockmarket. One theory is
that equities tend to do better
in the two years before an
election than in the two
years afterwards.
The idea is that after two
years presidents shift their
focus from making changes to
boosting the economy in order
to improve their chances of
re-election, even to the extent
of doing things that will
damage the economy.
Perhaps the most notorious
example was when Richard
Nixon all but forced Arthur
Burns, chair of the nominally
independent US Federal
Reserve, to loosen monetary
policy in order to bolster
Nixon’s chances of winning the
1972 election.
Nixon won the election in a
landslide and the stockmarket
performed strongly that year,
returning 19.2%. However, the
loose monetary policy also led
to a surge in inflation, forcing
the central bank to reverse
course, and equities then
slumped by 15% in 1973 and a
further 27% in 1974.
On the face of it, election
years do seem to be good for
the market, producing positive
This means that I now
have eight long tips
returns on 21 out of 25 (Computacenter, Howden
occasions between the start Joinery, B&M European
of 1924 and the end of 2020. Value Retail, Mitie, SThree,
However, the fact that it was Moonpig, SSP and IG
an election year didn’t prevent Group) and six shorts
the stockmarket doing badly (Paycom, Sunrun,
in both 2000 and 2008. Robinhood, Carvana,
Overall, the market has GameStop and Joby
returned an average of 12.5% Aviation) going forward.
in election years, almost I suggest that you
identical to the average raise the stop losses on
between 1924 and 2020. both Moonpig and
Other studies, such as one easyJet to 230p. I also
by Michael Edwards of the CFA recommend cutting the
Institute, seem to suggest that price at which you cover
the sweet spot for stockmarket Paycom from $325 to $275,
returns isn’t actually the cutting GameStop from $25
election year, but the one to $20 and cutting Sunrun
before that. from $26 to $20.

moneyweek.com 26 January 2024

24
Make tax less taxing
Self-assessment returns for 2022-2023 are due on 31 January
Ruth Jackson-Kirby
Money columnist
T he deadline for filing your
tax return is looming. If
you’ve left it to the last minute,
here’s how to avoid any fines
or penalties. If you need to file
a tax return for the 2022-2023
tax year you have until midnight
on 31 January. Thousands of
people used the festive period to
get their taxes done; 4,757 filed
on Christmas Day, according to
HMRC. But, at the start of the
month 5.7 million people who
need to file hadn’t done so.
A chore for more of us
More of us need to file a tax
return this year thanks to frozen
tax thresholds, high interest
rates on savings and growing
wages. There are a number of
reasons you may need to file
including the obvious ones,
(you need to file if you are
self-employed, receive income
from buy-to-let properties or
earned more than £100,000).
You may also need to file if
you have made a profit from
selling a second property,
shares or valuables; received
a foreign income or income
from dividends; or need to pay
the high-income child benefit
charge. More pensioners are
also having to file returns as
frozen tax thresholds mean the
state pension – which is taxable
– is propelling them into higher
tax brackets.
If you haven’t started your
tax return yet you need to get
cracking. You’ll need your
unique taxpayer reference
(UTR) to use the online service.
If you don’t already have one,
then it will have to be posted to
you. Next you need to gather
all the relevant paperwork.
This includes pay slips; details
of all the income you received
from all sources including
dividends, work and interest on
savings; pension contributions;
charity donations; and any
capital gains you’ve made from
disposing of assets such as
property or shares.
Familiarise yourself with
the various tax allowances that
could help you reduce your
bill. For example, basic-rate
taxpayers can earn up to £1,000
interest on their savings before
income tax is due. Known as the
26 January 2024
Personal finance
How to dodge
the rail rip-off
Avoid the ticket machines at
railway stations. Analysis by
consumers’ group Which has
found that some same-day
tickets sold at the machines
cost more than double what
you would pay online. Which
sent mystery shoppers to 15
stations around the country –
all run by a different train
operators – and checked the
price for 75 journeys. A
journey from Holmes Chapel
in Cheshire to London cost
£66 at a machine, compared
with £26 online from Trainline.
A trip from Northampton to
Cardiff cost £107 from a
machine and £43 online.
Don’t just shop online,
©Getty Images
however. There are
several other ways you can
If you work from home you may be eligible for tax relief worth £6 a week
cut your rail fare. Book up to
Personal Savings Allowance, professional membership fees
12 weeks in advance and you
will pay less than an on-the-
it drops to £500 for higher or subscriptions to approved day fare. You can either do
rate taxpayers and is £0 for professional bodies. Anyone this online or at a ticket
additional rate taxpayers. who does miss the 31 January office. You can cut your
There is also the dividend deadline will owe an immediate costs further by buying an
advanced ticket before 3
allowance. In the 2022-2023 £100 fine. If you still haven’t
March. From that date rail
tax year this was worth £2,000. filed three months later, you’ll
operators are putting up
Any dividend income above pay an extra £10 a day up to a
prices by as much as 4.9%.
this is taxed at up to 39.35%, maximum of 90 days. File more
Avoid travelling at peak
depending on your tax band. than six months late and you’ll times. Off-peak and super-off-
The exception is that you don’t pay a penalty of 5% of the tax peak tickets can cost less than
pay tax on dividends earned you owe or £300 – whichever is half the price of a standard
within an individual savings more – plus the initial fines. peak ticket. In general, peak
account (Isa). Remember, it isn’t just your times are 6.30am to 9.30am
and 4.30pm to 7pm. You can
We all also get a trading tax return that is due on 31
either ask at the ticket office
allowance. This allows you January. You also need to pay
for off-peak times and tickets
to make up to £1,000 a year any tax owing for that year by
or scroll train websites to find
tax-free from selling items, or the deadline too. If you are late
the cheaper rates.
occasional paid work such as paying your taxes, you will be Finally, don’t forget your
babysitting or tutoring. If you charged interest at the Bank railcard. You can cut your
work from home, you may also of England base rate plus 2.5 fares by a third and there are
be able to claim tax relief at £6 percentage points. That works cards available for several
a week. There is also tax relief out at 7.75%. After 30 days a categories of traveller: those
aged 26-30 or travelling with
available if you need to buy 5% penalty will be added to
the same person regularly, for
tools or uniforms, or run your your balance. This is added
instance, or families of up to
car for work purposes. You again at the six-month mark
four adults and four children.
can also claim tax relief for any and the 12-month mark.
Pocket money... scammers exploit AI
l If you have recently taken out a life insurance month; the same policy on Cavendish Online’s
policy you may pay up to £1,000 extra over the search was £12.79 a month.
life of the policy to cover commission paid to
brokers, advice firms and comparison sites, says l Artificial intelligence (AI) “has become a
Ali Hussain in The Times. powerful new weapon for scammers,” says
“An insurance industry insider told The Times Siddharth Venkataramakrishnan in the Financial
that financial adviser networks such as Quilter Times. He gives the example of a man who
and the Openwork Partnership, the broker received a phone call from his daughter saying
Mortgage Advice Bureau and comparison she had been kidnapped and he had to pay a
websites including Go Compare typically charge ransom. He could hear her screaming in the
customers about 10% more than their smaller background and raced to the bank to withdraw
rivals.” These groups have come to an everything he had.
arrangement with big insurers such as AIG, L&G “It was only a chance text from his daughter
and LV, giving them extra payments for selling that revealed that the voice on the phone didn’t
policies. “This cost is added to the premiums belong to her.” It was the work of scammers
and does not affect the insurer’s profits.” using AI. “The continued evolution... of the
Avoid these so-called loaded premiums by technology means scammers do not just pose a
comparing prices across different websites to threat to the unaware or vulnerable. Even
get the best deal. A search on GoCompare found cautious consumers are at risk of huge financial
a life insurance policy with L&G for £17.55 a losses from AI-powered fraud.”
moneyweek.com
 pensions 25

Seven ways to supercharge savings

There are several methods you should explore in order to maximise your retirement fund
David Prosser pension. Most schemes will Some £27bn of pension savings you expected? Moving your
Business columnist accept occasional one-off currently stands unclaimed. money to cheaper and better-
payments as well as regular Most of that money is tied performing plans can drive huge

I s getting on top of your

retirement planning a
financial priority for 2024?
If so, there are several ways to
give your pension a boost.
Raise your contributions
The best way to increase your
future pension is to save more
today. That sounds obvious,
but most savers set up their
contributions to be paid
automatically each month and
then fail to revisit them for
years. In the meantime, they
may get pay rises, finish paying
off mortgages, or enjoy a boost
to their discretionary income
in other ways. Putting at least
some of this extra cash to work
could have a transformative
effect in retirement.
Increasing your contributions
will also net you more support
from other sources. You will
receive extra help from the
state, as each new contribution
gets tax relief at your highest
marginal rate of income tax.
And your employer may
also pay more too: many
occupational schemes feature
higher employers’ contribution
rates for staff who pay in more.
Use your extra allowance
if you can
In 2023-2024, ending on
5 April, you can put up to
£60,000 into a private pension,
up from £40,000. More
restrictive rules apply to high
earners (broadly those earning
more than £240,000), but they
contributions, and you’ll be
entitled to tax relief on the
money. The only caveat here is
that you need to stay within the
annual allowance in the year
you make the payment. But
the carry-forward rules, which
allow you to bring forward
unused annual allowance from
the previous three tax years for
use in the current tax year, can
be really helpful.
Ensure you get the full
state pension
Many savers overlook state
pensions when they plan for
retirement, but this cash can
provide a strong base for
your income later in life. In
the 2023-2024 tax year, the
state pension is worth around
£10,600 and the triple-lock
link to earnings and inflation is
especially valuable.
But to get the full amount
you must have made at least
35 years’ worth of national-
insurance contributions. You
can check whether you have
gaps in your record using the
Gov.uk website, though you will
need a Government Gateway
user ID and password. If you
do, topping up your national-
insurance contributions can be
good value, providing a quick
boost to your future income.
Trace lost pensions
If you’ve lost touch with savings
you made in the past, now is the
time to track down the cash.
up in occupational pension
schemes where savers have left
previous employers, but failed
to keep them updated with
address changes. Insurers also
have substantial sums invested
on behalf of people who have
started individual schemes, but
then forgotten all about them.
The government’s pension
tracing service (see the Gov.
UK site) is a good place to begin
your hunt for this money.
Review your schemes
You don’t necessarily have
to find more cash today to
generate extra pension cash
tomorrow. By reviewing
your existing arrangements
– and making changes
where necessary – you may
also be able to generate
a boost.
Above all, focus on
two issues: are you
paying over the odds
in charges on any of
your pension plans,
and are your savings
generating the
returns
benefits. Consolidating several
plans with a single best-of-class
provider is one way to do this. If
you’re not sure how to address
this question, the cost of good-
quality independent financial
advice is worth paying.
Look beyond pension
products
Personal and occupational
pensions are not the only tax-
efficient route to a comfortable
old age. Individual savings
accounts (Isas) enable you to
put up to £20,000 a year into
a huge range of assets, with
all subsequent returns
completely tax-free.
Other opportunities
include schemes such as
venture capital trusts
and the enterprise
investment
scheme. These tax
shelters can boost
your savings and
will also give you
valuable flexibility,
with more options
about how and when
to access your cash.

News in brief... annuity rates hit new high

now receive higher annual
allowances too.
The changes provide an
opportunity for those who have
been maxing out on pension
contributions to increase their
savings. And the decision to
abolish the lifetime allowance,
which previously imposed tax
charges on pension funds above
a certain time, removes this
potential headache for savers
with deeper pockets.
Put lump sums to work
If you’re fortunate enough to
receive a lump-sum windfall
– a bonus at work, say, or an
©Getty Images
l Annuity rates have hit a new high, but may
also have reached a peak. The income on offer
on these products – which enable savers to
convert pension savings into guaranteed
lifetime income – is closely linked to interest
rates; with rates now expected to fall later this
year, the scope for further annuity-rate increases
is limited. But choosing your annuity provider
carefully will still make a massive difference.
Figures from Canada Life show that for a saver
with a £150,000 pension, buying an annuity from
the best provider would generate £13,000 more
in income over the first 20 years of retirement
than buying from the worst one.
l Tens of thousands of savers who have
transferred commercial property into their
on the transactions. Pension arrangements such
as Sipps allow small business owners to transfer
their firm’s property into their savings schemes,
but those doing so in recent years have routinely
been charged stamp duty. Now, HM Revenue &
Customs has confirmed that the tax may not be
payable on such transfers. Some savers have
already claimed valuable refunds.
l Defined-benefit pension schemes have
amassed record surpluses amid strong
investment returns and reduced long-term
liability valuations. The surge in surpluses is
likely to drive an increase in the number of
companies making “buy-out” arrangements –
paying insurers to take on their future pension
responsibilities – with many schemes now in

inheritance – consider putting pensions over the past decade could be owed possession of the money to fund such
some of the money into your compensation after wrongly paying stamp duty transactions for the first time.

moneyweek.com 26 January 2024

26 Personal view

Venture into venture-capital trusts

for tax-efficient vim and vigour
A professional investor tells us where he’d put his money. This week: Alex Davies,
founder of the high-net-worth investment service Wealth Club
UK taxpayers are grappling with the highest tax burden
in 70 years; the tax cuts announced in the Autumn
Statement failed to make a dent in it. Meanwhile,
pensions, despite the recent increase in allowances,
may still not be an option for many. So it’s no wonder
experienced investors turn to venture-capital trusts
(VCTs). VCTs provide essential capital to dynamic
young businesses – a driving force of the UK economy
– and offer very generous tax relief as a crucial incentive
to invest and to mitigate the risks involved.
When you invest in VCTs, you can receive up to
30% income-tax relief: a tax break of up to £60,000 if
using the generous £200,000 VCT allowance in full.
In addition, any dividends VCTs pay are tax-free.
This could be particularly valuable now that the
dividend tax-free allowance has been halved and is due
to be halved again in April 2024.
And despite the economic woes of the past few years,
VCT dividend payments have proved resilient. Over the
last three years generalist VCTs that are currently open
for investment have on average paid dividends totalling LYMA has created a clinic-grade skin laser for home use
19.4% of their net asset value (NAV) at the start of the
period, rising to 30.7% over five years and 69.1% over usually recurring revenues. The recurring, contracted
ten years. Meanwhile, VCT-backed companies continue revenue models have helped insulate the companies in
to grow at a faster rate than their listed counterparts. Apollo’s portfolio from the headwinds buffeting many
other businesses. As a result, over the past three and
An enviable record of exits five years Octopus Apollo is one of the top-performing
The British Smaller Companies VCT (LSE: BSV) and of the generalist VCTs. It targets an annual dividend of
the British Smaller Companies VCT2 (LSE: BSC) have 5% of NAV. Over the five years to 31 December 2023,
a loyal following among investors and an enviable it paid out dividends equivalent to a 35.1% yield.
record of exits. You gain exposure to more than 40
companies, predominantly providing business services. Investing in innovation
The largest holding is business intelligence-analytics Pembroke VCT (LSE: PEMB) describes itself as a “fund
platform Matillion. Matillion became the sixth VCT- led by entrepreneurs for entrepreneurs”. It seeks to back
“Business backed unicorn (a private company worth at least $1bn) innovative founders with disruptive business models in
in September 2021 and continues to grow strongly, with the consumer, technology and business-services sectors.
intelligence- sales up 46.2% to $83.75m in its most recent financial One example is the VCT’s largest holding: skincare
analytics year. Another example is AI-powered employee- and wellness brand LYMA, creator of the world’s first
engagement platform WorkBuzz. The VCTs don’t state clinic-grade skin laser for home use. LYMA ranks 11th
company a dividend target, but over the five years to 31 December in the 2023 Sunday Times Top 100 fast-growing UK
Matillion 2023, the two trusts paid out dividends equivalent to private companies list, and counts numerous celebrities
47.5% and 46.3% of NAV at the start of the period. among its customers. Other examples are photobook
has become The Octopus Apollo VCT (LSE: OAP3) is the app Popsa, one of Europe’s fastest-growing companies,
the sixth second-biggest VCT. When you invest, you get exposure and train-ticketing app Seatfrog.
to a portfolio of around 45 companies: commercialised The VCT targets an annual dividend of 5p per share.
VCT-backed businesses, typically business-to-business (B2B) Over the five years to 31 December 2023, it has paid out
unicorn” software companies with established, growing and 24.7% of NAV at the start of the period.
©The Telegraph 2024

26 January 2024 moneyweek.com

 Profile 27

The master of the dramatic comeback

Chinese property mogul Sun Hongbin is no stranger to adversity, and so remained calm and collected
when the market turned against him. He is now poised for a rebound. Jane Lewis reports
No one’s a winner in China’s company, Sunco, to a rival after
property market. But in the “a government crackdown on
race to buy time ahead of a soaring housing prices caused
hoped-for recovery, property it to run out of cash”. Later,
mogul Sun Hongbin has stolen a in 2017, he was ordered to do
march. While bigger rivals, such “26 hours of re-education in
as Evergrande and Country corporate governance” – an
Garden, remain “mired in embarrassing comedown for
negotiations with creditors”, one of China’s richest men
Sun’s outfit, Sunac, has scooped – after being censured for
a $10bn credit restructuring breaking the listing rules of the
deal from investors including Hong Kong Stock Exchange.
Ashmore Group and Barings.
What apparently swung the deal Waiting for the harvest
– which comes 18 months after Born in China’s Shanxi province
the company first defaulted in 1963, Sun seemed destined
on a dollar bond – was its to become an engineer before

©Getty Images
clear plan and fair treatment getting his start as one of the
of creditors. Sun didn’t go ambitious young executives
“missing in action” like some working for Legend (now
peers, a former bondholder told Lenovo), “a pioneer among
Bloomberg. He’s “one of the few “Sun tried his best to do what he could private businesses in the 1980s
chairmen who tried his best to even as the ship was going down” reform years”, says the Financial
do what he could even as the ship Times. Shortly after his release
was going down”. launching into the property-development from jail, he studied at Harvard Business
game, eventually building Tianjin-based School, then returned to China to launch
Slipping to the brink Sunac into China’s third-biggest property Sunco in 2003. But Sun is not your typical
Sun, 61, “knows a thing or two about empire, with projects in 62 cities, making Chinese boss, says Bloomberg. Favouring
living on the edge”, says Bloomberg. After annual sales of $92bn at its peak. In 2021, T-shirts and trainers, he often travels alone
a business dinner in Sichuan in September, Forbes put his private fortune at $9bn. on business trips, “eschewing the retinue
he was standing on a riverbank when he Sun’s conviction was later overturned, typical of high-ranking Chinese executives”
slipped and fell more than ten feet into a but his trajectory “from jailbird to and has overturned formal conventions in
ditch, and was rushed to hospital with bone billionaire” made him “an inspiration to the company. Employees typically refer to
fractures. “Confidants see the mishap as many”, noted the South China Morning him affectionately as “Old Sun”.
a metaphor for three harrowing years that Post in 2013. Although a naturalised US Despite this month’s deal, Sunac’s
brought his real-estate empire to the brink.” citizen, he bills himself as “a man who has survival isn’t guaranteed: the value of
Like its chairman, they say, Sunac is now successfully waded through the sometimes properties it sold last year fell by half and
recovering and poised for a rebound. muddy waters” of the Chinese business its Hong Kong-listed shares are down 97%
If so, it won’t be the first time for this world – surviving “more ups, downs and since their 2020 peak. Sun once mused that
master of “dramatic comebacks”. In the ups” than most. His determination to “doing business in the real-estate market
early 1990s, while working for the tech save Sunac was probably strengthened is like planting crops. When the weather is
giant Lenovo, Sun was “convicted of by another past business disaster, says good… we will all have good harvests. In
misappropriation of funds” and served The Wall Street Journal. In 2007, he was droughts or floods, there can be no crops”.
four years in prison. He sprang back by forced to sell his first residential property Eventually, he knows, the wind will change.

Airline entrepreneur takes on the “brand thieves”

You can see how people
would get confused.
Just think of all those
folk who bought gig
tickets to see Easy
Life, the critically
acclaimed indie
pop group, and
ended up on a
budget flight to
Tenerife. That was the
band’s good-humoured
response to the news late last
year that they were being sued
by easyGroup, the holding
company of airline easyJet, for
infringement of its trademarks.
The pop stars are not the only
ones to be feeling the wrath of
crusade to bring down the
“brand thieves” he sees
everywhere. James
Moir, the CEO of
Easyfundraising, a
company that helps
to fund charities, is
trying to see off Haji-
Ioannou’s “bullying”
and “ludicrous”
lawsuits, says Alistair
Osborne in The Times. Since its
inception, Easyfundraising says
it has raised more than £50m for
good causes, including
Macmillan Cancer Support and
Save the Children, but is now
bogged down in a costly “war of
attrition” with easyGroup.
lawyers in recent times include
Easyfun, the musician, hotel
group Premier Inn, over its
“Rest Easy” tag line, even
Northampton-based restaurant
easyCurry. Since 2015 Stelios
has filed more than 50 court
claims. The puzzler, as Osborne
has said, is why anyone would
be at all keen to be associated
with the “galumphing,
humourless billionaire” and
his brands anyway, all of
which, bar the airline, have been
a “complete flop”.
Haji-Ioannou was born in
Athens in 1967, the son of a self-
made Greek-Cypriot shipping
magnate, and started his
founded his own shipping firm
with financial help from his
father at the age of 25, but is best
known for creating the easy
family of brands, beginning with
easyJet in 1995, when he was 27.
Six years later he floated the
airline on the London Stock
Exchange to fund the airline’s
growth, and he maintain’s
ownership of the brand
through his private company,
easyGroup. He received a
knighthood in 2006, and is now
a resident of Monaco.
It seems that his court claims
are now “a key Stelios enter-
prise”, says Osborne. But “is it
©Getty Images

right that a knight of the realm

the group’s founder, Stelios Haji- Other entities that have business career working for his can develop a business built on
Ioannou (pictured), who is on a heard from easyGroup’s father, says Yahoo News. He bullying people via the courts”?

moneyweek.com 26 January 2024

28
Hurricanes and Spitfires formed the core of the RAF during World War II
Remembering “the few”
The air shows at IWM Duxford are great days out, says Matthew Partridge
“N ever in the field of
human conflict was
so much owed by so many
to so few,” said Winston
Churchill in the House of
Commons on 20August 1940.
A few weeks later, the Battle
of Britain reached a climax
on 15 September when the
Luftwaffe launched an all-out
attack in a final attempt to win
control of the skies. However,
the British victory led Adolf
Hitler to postpone his
planned invasion of
Britain, which is why
15 September is now
known as “Battle of
Britain Day”.
Every year,
this day is
commemorated by
a two-day airshow
at Imperial War
Museum (IWM)
Duxford. Located
around eight miles from
Cambridge, and an hour’s
train journey from London,
Duxford was originally built
during World War I as one of
the first RAF stations, before
serving as a flying school
and airbase for the next half
century. In 1971 it was handed
over to the Imperial War
Museum as a place where it
could store the exhibits that
were too large for the main
museum in London, which now
includes a Concorde.
IWM Duxford is worth
visiting at any time of the
year. It holds several “flying
days” throughout the summer
26 January 2024
Travel
and autumn, but it really
came alive during last year’s
Battle of Britain Air Show.
That event featured World
War II-era (WWII) dancing
and music, plus stalls run by
living-history groups. These
included groups from across
Europe, honouring the memory
of those Polish and Czech
fighters who served in 303
Fighter Squadron.Reenactors
representing the WAAF, Air
Transport Auxiliary and even
the Home Guard were also
there to remind us that the
“few” consisted of more than
just fighter pilots.
Of course, the big attraction
was the air spectacle. During
the five hours of flying, aircraft
ranging from World War I
(WWI) biplanes to the de
Havilland Vampire (the most
advanced British jet developed
during WWII) passed over the
crowds. It wasn’t just British
aircraft either. Fokkers of the
type flown by Germany as well
as American Mustangs and
B-17s made appearances. There
were also aerial acrobatics
performed by groups using
more modern aircraft, such as
the Flying Comrades (British
pilots flying postwar Soviet
aeroplanes), and, of course, the
world-famous Red Arrows.
However, none of the other
aircraft have quite the historic
“Hinxton Hall
stands for British
excellence in
life sciences”
symbolism of the Spitfire
and the Hawker Hurricane,
the two aircraft that formed
the core of the RAF during
WWII. Refined over multiple
generations, and adapted into
a version that could be used on
aircraft carriers, the Spitfire
remains perhaps the most
famous of them all. So, it was
only fitting the day concluded
with no less than 16 Spitfires
(as well as four Hurricanes)
tearing through the golden
evening light in the “Big Wing”
formation used in WWII.
The home of life sciences
If the Spitfires, Hurricanes
and Vampires represent the best
of British wartime engineering,
© ©IWM
then Hinxton Hall stands for
Britain’s ongoing excellence
in life sciences. Originally
built in 1748, the house and
surrounding land was acquired
by the Wellcome Trust in
1992 to build the Wellcome
Genome Campus. Over the
following decade the campus
played an important role in
the Human Genome Project
and it continues to produce
groundbreaking research.
Hinxton Hall also offers
accommodation, conveniently
located three miles from
IWM Duxford. The hall
has a small bar, as well as
a restaurant. The buffet
breakfast, which includes
sausages and bacon, as well as
toast, cereals and croissants,
was extensive enough to set
anyone up for a day at IWM
Duxford.
Those interested in nature
will also enjoy the hall’s 100
acres of grounds. The orchard
contains a wide range of
plants, as well as fruit trees,
and is gradually being turned
into a Victorian-style kitchen
garden. There is also a small
wetlands nature reserve,
which is home to a variety of
animals and birds throughout
the year, including otters and
kingfishers.
Matthew was a guest at IWM
Duxford. Tickets for their 2024
flying days can be bought on
iwm.org.uk. Single rooms at
Hinxton Hall start from £99
plus VAT, hinxtonhall.org
moneyweek.com
 Toys 29

The ultimate party boat

Azimut’s Verve 48 is an Italian-American plaything that’s at home in the Med

T he new Verve 48 from Italian boat builder

Azimut is one of two outboard-powered
yachts designed for the US market, but which are
now becoming popular in Europe, says Michael
Verdon in the Robb Report. The smaller Verve 42
was released in 2022, and the Verve 48 – actually
a redesign of the 24-year-old Verve 47 – was
launched last year. As part of its refresh, the 48
features “a larger, more open stern, including a
swimming platform with excellent space around
the three 600 hp Mercury outboards”.
Those Verado V12s are a relief, because the
450Rs on the old Verve 47 were “loud – like
really, really loud”, says Kevin Koenig in Boat
International. They were, after all, modelled
on engines made for the “go-fast market”. The
600s are a “better match” and the 48 runs a
full ten decibels quieter. However, the 48 is still
“plenty of fun to drive [and in] slaloms, the hull
is pleasingly grippy”. Those quieter 600s will be
most appreciated at the swimming platform at
the back, where the fold-out terrace “makes the
Verve’s main deck excellent for entertaining larger
groups”. That’s why Azimut has also equipped
the 48 with “loads of cold storage for drinks, in a
nod to the thirsty US market”.
A glamorous weekender
“A boat like this really needs to deliver on its
open-air party space and the… 48 nails it,”
says Alex Smith in Motor Boat and Yachting
magazine. A table even rises from the decking
that can also be lowered to serve as the infill for
a huge sunbed. “But for our money, the T Top
[over the helm station] is an even more valuable
piece of design… [It] encompasses the full breadth
of the boat, enabling the cockpit to span the
entire beam.” As a “highly glamorous sporting
weekender, there’s no reason at all why [the 48] “A boat like this
shouldn’t make as much sense for party people
in the Med as for those in the US… In short, if really needs to
you want something fresh, fast and frivolous… deliver on its open-
this Italian-American plaything is likely to prove
dangerously distracting”. air party space and
the 48 nails it”
Price: €1.15m before tax, azimutyachts.com

Wine of the week: top Champagne from a talented actor

NV Porte Noire, Petite
Porte Rosé, Champagne,
France
£55, harveynichols.com;
£58.80, portenoire.co.uk
Matthew Jukes
Wine columnist
Actor Idris Elba might not be the
first chap you think of when it
comes to great taste in fine wine,
but he is a rare celebrity who has
turned his hand to the Champagne
world with tremendous accuracy
and flair. I reviewed his NV Petite
Porte Grand Cru Blanc de Blancs
(£46.80, portenoire.co.uk)
extremely favourably last year on
my website, and it might sound
hard to believe, but the value for
money for this wine and my
featured rosé is tremendous.
Champagne Sanger makes the
Blanc de Blancs, and it is a laser-
sighted, mineral-soaked,
chalky, and teasingly
refreshing chardonnay with a
pure and superbly balanced
palate. As I approached the
rosé, I hoped lightning would
strike twice, and I am thrilled
to report that it did. Petite
Porte Rosé is refined,
bright as a button, gently
perfumed with discreet
raspberry and red cherry
tones, and yet it seems
fresher and more
invigorating than hosts of
extremely well-known
and much more
expensive wines.
Interestingly, this
stunning rosé is based
on a 90% chardonnay chassis,
and it is clear that this linear,
mid-palate shape appeals
to Elba’s sensibilities.
And 10% pinot noir adds
hedgerow fragrance, a coral
hue and little more, thankfully.
The last thing I want in my
preferred rosé Champagnes
is body, weight, and impact,
yet many styles these
days are more akin
to sparkling reds than
elegant rosés.
Matthew Jukes is a winner of
the International Wine &
Spirit Competition’s
Communicator of the Year
(MatthewJukes.com).

moneyweek.com 26 January 2024

30 Property
This week: properties once owned by famous people – from an Arts & Crafts house in Gloucestershire re

Appleton House, Stinchcombe Hill, Cheney Court, Ditteridge, Box, Corsham,

Gloucestershire. An extended, refurbished
Arts & Crafts house built in 1935 and once
rented by Roger Moore . It is set in large
landscaped gardens and has leaded-light
windows, oak floors, open fireplaces and
an orangery. 6 beds, 5 baths, 3 receps, 2.88
acres. £2.1m. Knight Frank 01285-882006.
Wiltshire. P.G. Wodehouse once regularly
visited his grandmother at this 17th-century
manor house. It has carved stone fireplaces
and comes with a range of ancillary
accommodation. 9 beds, 8 baths, recep hall,
3 receps, 27 bedroom suites, 11.6 acres.
£4.5m Strutt & Parker 01225-685801.

The Abbey, Penzance,

Cornwall. A large house in
an elevated position above
Penzance harbour with views
towards St Michael’s Mount.
It was once owned by the
model Jean Shrimpton and her
husband and has been run as
a boutique hotel with two
self-catering apartments.
The house has open fireplace
and walled gardens. 6 beds,
6 baths, 2 receps, two 1-bed
apartments. £1.95m Pritchard
& Company 01608-801030.
26 January 2024 moneyweek.com

ented in the 1960s by Roger Moore, to the Worcestershire country retreat of Edward Elgar
Birchwood Lodge, Birchwood,
Storridge, Worcestershire. This period
property in the village of Storridge
has far-reaching views over open
countryside, and was the country
retreat of Edward Elgar from 1898-
1903. It has an open-plan dining/
living area with sliding doors opening
onto a kitchen with an Aga. 5 beds,
2 baths, recep, gardens, paddocks,
woodland, solar panels, 2 acres.
£700,000 Alan Morris 01684-561411.
moneyweek.com
Property 31
Barton Street,
London, SW1P. A
Grade II-listed five-
storey 1720s house in
Westminster with a blue
plaque commemorating
former resident
Lord Reith. The house
has sash windows
with shutters, wood
floors, open fireplaces,
a kitchen with an Aga,
and two terraces,
including a top-floor
terrace overlooking the
Houses of Parliament
and Westminster Abbey.
6 beds, 4 baths, 4 receps,
study, breakfast kitchen,
top-floor kitchenette.
£5m Hamptons
020-3582 3220.
Beach House,
Worthing. An apartment
in a Grade II-listed
Regency villa on the
seafront with three
blue plaques, one of
which commemorates
US playwright Edward
Knoblock. 2 beds, 2 baths,
recep, kitchen, landscaped
garden, off-street parking,
share of freehold.
£695,000 Winkworth
01903-216219.
The Spinney, Twyncyn,
Dinas Powys, South
Glamorgan, Wales. A
contemporary house formerly
owned by singer Charlotte
Church in a secluded location
close to a village. It has a large
open-plan dining kitchen
leading onto an orangery with
three French doors opening
onto a terrace. 7 beds, 3 beds,
breakfast kitchen, recep,
playroom, ground-floor studio
annexe, balcony, gardens,
terraces, woodland. £2m+ Fine
& Country 02921-690690.
Redchurch Street,
Shoreditch, London E2.
A four-storey, four-bedroom
property in Shoreditch that
once served as the home and
studio of artist Tracey Emin .
The ground floor is currently
laid out as a studio with a
darkroom, bathroom and
separate cloakroom. The
spacious upper floors have
large sash windows and include
a well-equipped kitchen with
an outdoor terrace and a
second, larger terrace. 4 beds,
2 baths, recep. £1.5m Fine &
Country 020-7278 1710.
26 January 2024
32 Collectables
Investors seek
Calling time safety in gold

on vintage
Retail investors have been
racing to get their hands on
all things golden. The Royal

watches
Mint reported a 7% year-on-
year rise in the number of
customers buying bullion in
2023, along with a 19% rise
Chris Carter reports in investors capitalising on
record-high prices to sell

W atches of Switzerland
(WoS), the biggest
retailer of Rolexes in Britain,
has suffered a mauling. Time
was, not so long ago during the
pandemic, when luxury-goods
companies of all stripes were
cashing in on the predicament
of wealthy collectors stuck at
home with money to burn. No
longer, it seems. Last week, the according to the ChronoPulse
share price in London-listed
WoS fell by around a third on
the news that the company had
“experienced a volatile trading
performance in the run-up to
and beyond Christmas”, in the
words of boss Brian Duffy. He
also blamed the consignment
of watches
WoS had “Valuations in the
received from
Rolex – mainly secondary market
steel-based and are ticking lower”
fewer of the
really expensive steel and gold
ones. Maybe Rolex was feeling
the pinch from gold prices,
which are up by around 12%
since early October.
But investors also read into
the announcement a fracturing
relationship with WoS’s luxury
supplier, as Laura Onita
and Oliver Ralph note in the
Financial Times. Last year,
Rolex bought rival retailer
Bucherer, “raising fears” the
luxury watchmaker was looking confidence in the existence of a
to sell directly to consumers and solid foundation for a potential
freeze out WoS.
Then again,
the pain isn’t
WoS’s alone.
Having soared
in the run-up to
2022, valuations in
the secondary watch
market have been ticking
lower ever since. They are
now down by almost a quarter,
watch index, which tracks the
prices of 140 watch models.
“Things have largely stabilised,
or are starting to correct
upwards” though, Silas Walton,
founder of London-based dealer
A Collected Man, tells Victoria
Gomelsky in The New York
Times. His
co-interviewee,
Austen Chu,
founder of
Hong Kong
consignment
platform Wristcheck, agrees.
Whereas in the past, Chu’s
clients – 70% of whom are
aged under 35 – were more
interested in “value retention,
investment first”, he now thinks
they are more driven “from a
passion standpoint”.
That may be true. But the
fact that Chu is most looking
forward to “the reduction of
interest rates” in 2024 to lift
the market doesn’t inspire
rebound, at least at the top end
their gold back to the Mint.
A little over three-
quarters of gold buyers
purchased “fractional”
products smaller than a
Troy ounce, which is
perhaps unsurprising
given the £53,000 it would
cost to buy a kilogram of the
stuff at the moment. One-
gramme bars, sovereigns
and 1/10th oz Britannias
were the most popular
products sold. The last two
have the advantage for
investors resident in Britain
of being free of capital gains
The Paul Newman tax due to their status as
Lemon Daytona made legal currency.
just shy of $1m There is, of course, a huge
difference between bullion
of the market. By and and numismatic value – that
large, big spenders are less is, buying coins solely for the
metal value as opposed to
averse to rate changes.
That said, the market has the artistic or historical
values and rarity.
at least held up for Phillips. Fortunately for collectors,
The auction house’s leading the Mint has also released its
watches department in New range of commemorative
York enjoyed its most successful coins for this year. The 2024
year ever in 2023, bringing in Annual Set includes five new
$52.3m. In December, it sold designs to mark various
a Patek Philippe Ref. 1518 anniversaries: a £5 coin to
timepiece in pink gold for $1.8m celebrate Buckingham
as part of its “The New York
Watch Auction: Nine” that
made almost $26m. That sale
total also includes the yellow
gold Rolex “Paul Newman
Lemon” Daytona Ref. 6264
(pictured) that sold for just
shy of $1m. If only Watches of
Switzerland could get its hands
on a few more like those.

Auctions Palace, a £2 coin (pictured) to

mark what would be
Going… Celebrities are Gone… A six-foot dog mascot Winston Churchill’s 150th
notorious for taking props from suit, as seen in the HBO series
birthday in November;
sets to keep as mementos, says Succession, sold for $7,812.50
another £2 coin for the 200th
Chloe Mac Donnell in The earlier this month at Heritage
anniversary of the National
Guardian. That could soon be a Auctions in Texas, says Callie
Gallery; a special 50p to
thing of the past, as increasingly Holtermann in The New York
celebrate the Royal National
items used in film and TV Times. A very hungover cousin
Lifeboat Institution (RNLI),
productions are heading to Greg, played by Nicholas Braun,
which is also 200 years old in
auction after filming is over. throws up while wearing it in the
March; and another 50p to
Bonhams in London is currently first episode. The sale’s “most-
mark the Paris 2024 Olympic
hosting an exhibition of around coveted” item, however, was the
and Paralympic Games. The
450 items from the Netflix series boxy Burberry tote carried by an
commemorative sets will be
The Crown ahead of a sale on interloper and ridiculed by Tom
available on The Royal Mint
7 February. Among the top lots is Wambsgans (Matthew
website (royalmint.com),
a replica of the No. 10 Downing Macfadyen) as being “a
priced from £34.50. All but
Street façade, with an upper pre- ludicrously capacious bag”. The
the Churchill coins will also
©Phillips; ©Royal Mint

sale estimate of £30,000; a replica set of offending accessory was “viciously memed”
©HeritageAuctions

be made available to buy

ceremonial garments worn by Claire Foy as a
young Elizabeth II (£30,000); and a reproduction
of the Gold State Coach (£50,000).
online, says Holtermann, but the seller may
individually at various times
have had the last laugh. The bag sold for
throughout the year.
$18,750, including buyer’s premium.

26 January 2024 moneyweek.com

 Crossword 33
Bridge by Andrew Robson Tim Moorey’s Quick Crossword No. 1192
A bottle of Taylor’s Late Bottled Vintage will be given to the
Finesse or squeeze? sender of the first correct solution opened on 5 February
West led a Heart v Six Notrumps, and declarer counted 11 top tricks. 2024. By post: send to MoneyWeek’s Quick Crossword
No.1192, 121-141 Westbourne Terrace, Paddington, London W2 6JR. By email:
The most obvious chance for a 12th lay in the Spade finesse (Ace
scan or photograph completed solution and coupon and email to: crossword@
then low to the Knave). Declarer won the Heart lead, and rattled off
moneyweek.com with MoneyWeek Crossword No.1192 in the subject field.
his nine winners in Hearts and Clubs.
Dealer West North-South vulnerable
♠ A4
♥ A104
♦ 74
♣ KQJ982
♠ Q76 N ♠ 109852
♥ 6532 ♥ J87
W
♦ AQ1063 E ♦ 982
♣ 3 S ♣ 75
♠ KJ3
♥ KQ9
♦ KJ5
♣ A1064
The bidding
South West North East
pass 1♣ pass
2♣* 2♦ 4♣** pass
6NT*** pass pass pass

* Inverted raise, showing a limit raise or better in partner’s Clubs.

** Imparting his extra playing strength.
*** To protect his Diamond honours.

Declarer reduced down to his three Spades and the singleton King
of Diamonds. West knew it was hopeless to reduce down to all his Across clues are mildly cryptic whilst down clues are straightforward
Spades and the Ace of Diamonds. Declarer could then safely cash ACROSS DOWN
the Ace of Spades then exit with a Diamond to endplay West to lead 1 Settled on Chambers edition (7) 1 Take an exam again (5)
into declarer’s King-Knave of Spades. West correctly reduced to a 5 Protest in which, oddly, you take 2 Fathers (3)
doubleton Queen of Spades and Ace-Queen of Diamonds. a stand (3-2) 3 Protect (7)
Declarer cashed the Ace of Spades and led a second Spade. 8 Supporter of English poet travelling 4 Fly (5,8)
Finesse or drop? At the table both declarers took the Spade finesse around America (9) 5 Mediterranean
and went down two, West winning his now bare Queen and cashing 9 Not entirely wise, in decline (3) republic (5)
the Ace-Queen of Diamonds. 10 It’s dogma whichever way you 6 Take vehicle for
Should declarer have read the position and played to have look at it (5) a trial (4,5)
squeezed West? If West held the Queen of Spades, he would 12 Ready to change from a long time 7 Nullifies (7)
certainly have led a Heart at trick one (on grounds of safety); if West ago (4,3) 11 John McEnroe,
held only low cards in both majors, he might still have led a Heart, 13 What an energy minister has to for one (3,6)
but he might have led a Spade. That he did not is a suggestion he has succeed in? (5,8) 13 Aussies for an
the Queen. 15 Low toll for berth (7) English person (7)
17 Old sovereign found in Belgian city (5) 14 Disease (7)
19 Church bar opening to cause disgust (3) 16 Norwegian dramatist (5)
For Andrew’s four daily BridgeCasts, go to andrewrobsonbridgecast.com
20 Who may be working in Dover 18 Makes level (5)
and Tees? (9) 21 Poetic tribute (3)
22 One gives warning for seductive lady (5)
23 Nuns shake in distress after taking
day off (7)
Name

Sudoku 1192 Address

To complete MoneyWeek’s
2 4 Sudoku, fill in the squares
9 4 6 5 2 in the grid so that every row
email !
and column and each of the Solutions to 1190
3 7 1 4 nine 3x3 squares contain all Across 1 Swarm 4 Recruit 8 Opposed 9 Binge 10 Eve 11 Nicknames
the digits from one to nine. 12 Supper 14 Stodge 17 Louisiana 18 Sir 19 Chino 20 Treacle 21 Slender
3 7 9 The answer to last week’s 22 Snout. Down 1 Scoter anagram incl t 2 Apple two definitions
puzzle is below. 3 Misunderstood anagram 4 Redact red act 5 Cabinetmakers Prime
ministers 6 Unnamed misleading definition 7 Tiers homophone
6 5 1 13 Pauline anagram 15 Earnest homophone Ernest 16 Taster S inside tater
6 4 8 5 9 2 8 3 4 7 6 5 1 17 Locus locus(t) 18 Sicko C inside anagram of oiks
4 1 5 9 6 2 3 8 7
8 1 4 7 3 3 6 7 1 8 5 2 9 4
The winner of MoneyWeek Quick Crossword No.1190 is:
Dave Thompson of Bolton
1 7 7 4 1 2 9 3 5 6 8 Tim Moorey is author of How To Crack Cryptic Crosswords, published
by HarperCollins, and runs crossword workshops (timmoorey.com)
5 9 2 8 7 6 4 1 3
MoneyWeek is available to visually Taylor’s is one of the oldest of the founding Port houses, family run and entirely
8 3 6 4 5 1 9 7 2
impaired readers from RNIB National dedicated to the production of the highest quality ports. Late Bottled Vintage
Talking Newspapers and Magazines 6 5 4 7 2 8 1 3 9 is matured in wood for four to six years. The ageing process produces a high-
in audio or etext. 2 8 3 5 1 9 7 4 6 quality, immediately drinkable wine with a long, elegant finish; ruby red in colour,
For details, call 0303-123 9999, with a hint of morello cherries on the nose, and cassis, plums and blackberry
or visit RNIB.org.uk.
1 7 9 6 3 4 8 2 5 to taste. Try it with full-flavoured cheeses or desserts made with chocolate.

moneyweek.com 26 January 2024

34
Milei speaks truth to power
The Argentine president had a lesson for the elites gathered at Davos
Klaus Schwab sees the enemy, its name is libertarianism
Bill Bonner
Columnist
A
llianz’s CEO Oliver
Bäte warned the World
Economic Forum (WEF),
gathered in Davos, Switzerland,
that the natives are getting
restless. If elites weren’t careful,
he said, there could be a revolt of
the masses. WEF founder Klaus
Schwab sees the mob forming,
and identifies its ringleaders:
“an anti-system which is called
libertarianism, which means
to tear down everything which
creates some kind of influence of
government into private lives”.
Meanwhile, the outsiders are
winning. Donald Trump won
the Iowa Republican primary
contest – by a strong margin.
Geert Wilders won in the
Netherlands. And in perhaps
the most exciting and impressive
turnaround yet, Javier Milei
took over in Argentina.
You could characterise most
of these outsiders as “populists”,
“authoritarians”, or “right-wing
nut cases”, depending on your
view. But Milei is a different
proposition entirely. He is like
Ronald Reagan might have been
if he’d had time to read Friedrich
Hayek and Frédéric Bastiat,
study classical economics,
philosophy and history, and if
the CIA hadn’t misled him into
believing the Soviet Union was
a great military threat, when in
fact it was a dying empire.
26 January 2024
Last word
Like it or not, Milei has a
coherent theory about the way
the world works, and, from
our point of view, a much more
attractive one. He explained it to
the assembled hacks, jackasses
and deep-staters at Davos. Like
Daniel walking into the lions’
den, he had a message that was
so unexpected, so inhabitual in
all public discussion, so at odds
with the Davos philosophy, it
was dazzling and spellbinding:
“We’re here to tell you that
collectivist solutions are never
the answer to the real problems
that have afflicted the world.
Free-market capitalism is not
only the only system to relieve
“Javier Milei at
Davos was dazzling”
poverty, it is also the only
moral system. The state is not
the solution. The state is the
problem. Long live freedom!”
Milei was challenging the
fundamental creed of the Davos
group. They are the elite of
the elite, captains of industry
(there are 800 leading CEOs in
attendance), along with heads
of state from all over the world.
They are movers, shakers, the
intellectuals and power brokers
who’ve created many of the
problems we now face. But
whatever the challenge, real
or imagined, they are ready
to meet it head-on, with more
“solutions” that increase their
own prestige and power.
©Getty Images
And there was Milei,
standing in front of them, and
telling them all, essentially, to
f-off. “Collectivist” solutions
don’t work, as he said. But
the reason they don’t work
is not that they involve
collective action. We all work
“collectively” in one form
or another. A company is a
collective undertaking. So is a
family. And a church. A tribe.
A town. All of them involve
groups of people working more
or less together, following
certain rules, with more or less
common goals, guided by free
markets that tell us what things
are really worth.
Man is a social animal.
He cannot exist unless two of
his species get together. And he
cannot prosper unless he works
with others, to sow, to reap, to
build, to exchange the fruits of
one for the services of another.
Capitalism is a collectivist
undertaking. It requires
near-constant exchanges
and interchanges between
people who are never fully
independent of one another.
The difference between
capitalism and the kind of
collectivism that Milei is
talking about is that the former
is voluntary; the latter is not.
At the end of Milei’s speech,
the elites gave polite applause,
the kind reserved for honest
preachers. They must have
known he was right; but they
didn’t want to hear it.
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