Table of contents for Issue 1266 in MoneyWeek

Interest rates may stay higher for longer. The Bank of England’s monetary policy committee (MPC) held borrowing costs at 4.25% at its June meeting. Interest rates have fallen 1% since the first cut in August last year, yet the MPC is in no hurry to cut as it waits to assess the impact of oil-price volatility and higher taxes on UK employers, says James Gard on Morningstar. Markets are pricing in two more quarter-point cuts this year, but the MPC is taking a “gradual and careful” approach. With annual UK inflation still at 3.4% in May, UK rate cuts have been much slower than in the eurozone, where they are already down to 2%. “The MPC is stuck in a quandary,” says Matthew Ryan of global financial services firm Ebury.…

Housebuilder Berkeley has warned investors to “brace for a period of lower returns”, says Jonathan Prynn in the Evening Standard. It also blamed “geopolitical and macroeconomic volatility” for a 5% decline in pre-tax profits in the year to 30 April. The news was accompanied by changes at the top. Long-serving CEO Rob Perrins, who has led the company since 2009, will be replaced by chief financial officer Richard Stearn. Despite these problems, Berkeley still thinks it will achieve its annual profit estimate of £450m this year. It’s not surprising that Berkeley’s profits have fallen, says Richard Hunter on Interactive Investor: ”it’s “been a difficult few years for housebuilders”. Nonetheless, Berkeley’s focus on London and the southeast, the “systemic undersupply of homes” and the fact that employment levels and wage growth…

Shares in Foshan Haitian Flavouring and Food closed 0.6% higher on their first day of trading in Hong Kong after China’s largest condiment maker raised HK$10.1bn (£961m) at its initial public offering (IPO), says the South China Morning Post. This was the bourse’s second-largest listing of the year, burnishing Hong Kong’s reputation as a top global listing venue and providing a gateway for Chinese companies to connect with international investors. The company was valued at $27.15bn. Foshan is looking to expand globally, and the proceeds raised will be used to boost its production capacity, supply chain and product development.…

Copenhagen Drug bust-up: Novo Nordisk is to end its partnership with Hims & Hers Health after less than two months owing to the latter’s sale and promotion of cheap knock-offs of the weight-loss drug Wegovy, says Annika Kim Constantino on CNBC. The share price of both companies fell sharply on the news; Hims & Hers lost 34% and Novo 5%. In April, the Danish firm announced it was collaborating with Hims & Hers to distribute Wegovy. However, Wegovy has been on America’s “official shortage list” since February, leaving Novo exposed to “compounding pharmacies”, which are permitted to copy branded drugs during shortages at much lower prices, says The Economist. Hims & Hers’s CEO Andrew Dudum said that Novo Nordisk had been pressurising his firm to “control clinical standards and steer…

● This year started well enough for Gem Diamonds, which owns 70% of the Letšeng mine in Lesotho, “famous for producing large, exceptional white diamonds”, says Ian Conway in Shares. The firm reported that “all operational metrics” for 2024 were within or ahead of guidance and said it found 13 large diamonds of 100 carats or more, compared with five in the previous year. However, in April it said that the first quarter’s large diamond tender had been postponed due to uncertainty about US tariffs, raising doubts about whether sales will be delayed again this quarter. The shares have continued in the long-running downward trend that has seen them lose 90% of their value over the past decade. “Diamonds may be a girl’s best friend, but they don’t seem to…

The US equity market is the “most mispriced asset” because investors are still underestimating the risk of a recession and higher inflation driven by US trade tariffs, says economist Anatole Kaletsky. “Over the next six to 12 months, if the American economy goes into recession in the second half of this year, which I think is pretty likely, and if that recession is accompanied by higher inflation, [this] cannot be consistent with American shares continuing to trade at all-time records,” Kaletsky tells Citywire. “The risk of inflation is… well known because tariffs are just automatically going to raise American prices [and] increase [the] inflation rate to 3.5% to 4% instead of 2.5% to 3%. So, why is that not priced into equity markets?” “In the bond market, there’s more of…

capx.co Lee Kuan Yew, the founding father of modern Singapore, was once a student in Britain, and he was impressed with the “well-ordered and disciplined” society he discovered here, says Mani Basharzad. One wonders what he would make of it today. Last year, the number of shoplifting offences were 20% higher than in 2022. Organised gangs have moved in to profit from a softening of the law. But the decline is about more than incentives. Social trust lies not only in rules or institutions, but also in “shared values, norms and local beliefs”. These have been undermined by mass migration and the pursuit of diversity. When difference “becomes a goal in itself, it may erode common sense, common ground and common values”. Diversity is not inherently a problem. But a…

The active versus passive debate has been raging for the past two decades. The biggest issue with active funds is fees. No investor should pay higher fees for sub-par performance. Still, if managers can outperform – earnings their fees and then some extra – it is a good deal for investors. However, it is difficult to dispute that passive funds beat active ones on average over the long run. The S&P Indices Versus Active (Spiva) reports from S&P Dow Jones consistently show that active funds have lagged behind relevant benchmark indices over long periods. Among US-based large-cap US equity funds, 64% have underperformed the S&P 500 over the past 24 years. In Europe, 93% of funds underperformed the S&P Europe 350 over ten years, while 82% of UK funds have…

In the vast and fragmented world of building-materials distribution, a new player is emerging with bold ambitions to reshape the industry. QXO launched in 2023 and aims to become a market leader in an $830bn sector that supplies everything from lumber to roofing for homes, offices and infrastructure projects. Led by serial entrepreneur Brad Jacobs, whose record of transforming industries is unmatched, QXO is poised to capitalise on powerful growth trends and deliver substantial value for shareholders. With a strategy rooted in acquisitions, technology and scale, QXO offers a compelling opportunity to back a visionary leader in a market ripe for consolidation. Ambitious plans QXO’s product range spans doors, windows, plumbing, roofing and more, catering for new construction and renovation projects. Unlike traditional distributors, QXO prioritises technology, aiming to streamline…

● The recent u-turn on winter fuel payments to pensioners has sparked a wave of new scams, fraud experts warn. Many older people report receiving text messages inviting them to apply for winter fuel payments – even though these will be paid automatically to all those eligible from this winter onwards. Those sharing financial details after receiving a scam message are at risk of falling victim to a financial crime. ● The number of people declaring themselves bankrupt in the UK continues to increase. But if you’re considering insolvency, make sure you understand the implications for your pension savings. Pension assets are normally protected from your creditors, but if a bankruptcy trustee believes you have deliberately made excessive pension savings to move money out of reach, it may be able…

It has been a mixed fortnight for my five long tips, with two rising but three declining. Drinks company AG Barr rose from 684p to 688p and vending machine firm ME Group increased from 215p to 226p. However, payments firm Corpay fell from $342 to $322 and telecoms firm Airtel Africa depreciated from 178p to 171p. Foodpackaging specialist Hilton Foods also slipped, from 863p to 836p. Overall, the losses on my long tips have now reached £600. This is nominally lower than the £880 I was losing two weeks ago, but that is a consequence of the fact that I am no longer counting Domino’s Pizza Group and Harworth – both stocks triggered stop-losses before my column a fortnight ago. The good news is that my short tips did somewhat…

Paul Johnson, director of the influential Institute of Fiscal Studies (IFS) think tank, is to step down from his role this summer, says Chris Dorrell in City AM. Johnson joined the IFS in 1988 before entering the civil service in 1998. He served in the Department of Education and as director of public spending in the Treasury, before rejoining the IFS as director in 2011. In that time Johnson, now 57, built a reputation as a “skilled communicator and an excellent economist”. He will now take up the role of provost of Queen’s College, Oxford. Johnson is probably the “best-known economist in the country”, says Robert Crampton in The Times – “the thinking person’s fiscal crumpet” with a knack for making politicians “quiver” and the rest of us “listen up”.…

Amazon’s CEO Jeff Bezos’s impending wedding to US television presenter Lauren Sánchez in a lavish three-day, $10m celebration in Venice has irritated anti-tourism activists, say Alberto Brambilla and Alessandra Migliaccio on Bloomberg. As hotels and gondola operators prepare for the wedding’s 200 guests, the “No Space for Bezos” movement plans to disrupt the nuptials by blocking access to the rumoured venue using inflatables. Tourism is vital for Venice’s economy, generating $1.5bn annually, and the city is set to host 600 destination weddings this year. But with annual visitors now eclipsing 13 million and the local population declining, Venetians have become frustrated with changing neighbourhoods, as more shops cater for tourists than residents. With a €5 day-tripper tax and a ban on large cruise ships, there was a 6.7% fall in…

Five to buy Lagercrantz The TelegraphLagercrantz comprises 80 firms that are leaders in technologies in growing, niche markets. Management of its five divisions is decentralised, with a focus on cash generation and a long-term goal of expanding margins and sales. Acquisitions generate two-thirds of growth, and the Swedish group aims to buy up to eight companies a year. Although the shares are “expensive”, acquisitions should help Lagercrantz exceed forecasts. SEK217 Idox Investors’ ChronicleDespite reporting higher revenue, strong cash flow and stable margins in its recent semi-annual results, Idox’s stock price has barely budged because its full-year earnings forecast was “conservative”. Two-thirds of revenue is generated from its Land, Property, and Public Protection (LPPP) arm, which provides software to local governments. Half-year LPPP revenue grew 3% and recurring revenue rose 12%…

What is leasehold? A form of property ownership that governs almost all flats in England and Wales, but is extremely uncommon anywhere else in the world. Scotland’s nearest equivalent, known as “feuhold”, was abolished in 2000. The “owner” of a leasehold flat doesn’t actually own the flat or the land, but merely acquires the right to it for a fixed period. Ownership is retained by a freeholder (or “landlord”), who grants a lease (typically of 99 or 125 years, but sometimes as high as 999 years). The leaseholder pays an annual service charge to the freeholder to cover maintenance of communal areas and insurance, plus a “ground-rent” fee. Once the fixed period is up, all rights to the property revert to the freeholder. In practice this means the leaseholder must…

The net asset value (NAV) of an investment trust is supposed to represent what would be left if you sold all its assets and paid off all its liabilities. For trusts investing in liquid, large-cap listed stocks, the NAV should be pretty close to what you would get in reality. For small-cap funds, you might receive less if you were selling large stakes or liquidating very quickly, but you would hope that it’s a fair reflection of what you would eventually get if you were not a forced seller. Funds that invest in unlisted assets – private equity, real estate, infrastructure and so on – are different. There’s no continuous market price for the assets, so the NAV is calculated from other data. These might include: recent private transactions for…

Reeves is a disaster for Britain Sam Ashworth-HayesThe Telegraph “Less than a year after taking office, Rachel Reeves already looks to have inflicted irreparable damage on Britain’s economy,” says Sam Ashworth-Hayes. Her October budget saw a spending increase of almost £70bn, enabled by £36bn in tax rises and “tweaks to definitions of government debt”. The hike in employers’ national insurance led to a steep drop in payrolled employees, while the “massive expansion” in borrowing has made future tax rises more likely and made investors nervous. Gilt yields have risen. Growth forecasts have fallen. By targeting some of the wealthiest and most mobile groups with changes to taxes and the non-dom regime, Reeves has “created a new problem”. The welfare state depends on the top 1% because they pay 29% of…

wsj.com The debate over the legacy of slavery still rages in the US, says Roland Fryer. An economic approach can illuminate the issue. Learning what slavery entailed is enough to horrify us, but if we want to understand why it endured, we need economics. The work of economic historians, particularly Robert Fogel, who won the Nobel prize for his work on this issue, and Stanley Engerman, overturned the previously fashionable view that bondage was an “economically backward form of racist exploitation” that “dragged the American South down”. Data from slavery records show that slavery was “anything but haphazard”. Skilled labourers such as blacksmiths and carpenters, for example, fetched a premium of roughly 50% more than ordinary field hands; habitual runaways and drinkers were discounted by a similar margin. Age was…

Maven Renovar has become the first venture capital trust (VCT) to have its entire board voted out, in an apparent backlash against its recent change of manager. Maven Capital Partners took over from Amati Global Investors – with the VCT’s strategy also set to change to allow more investment in unlisted stocks – without investors being asked to vote on the decision. But at last week’s annual general meeting, resolutions to re-elect board members and approve the new strategy were all voted down. The board blamed the outcome on low turnout and said that a “significant portion” of votes were cast by shareholders linked to Amati. A new meeting will now be called, with some of the current board remaining in office for essential duties until then.…

Has your family started planning for inheritance tax (IHT)? Investment platform Quilter suggests that by 2027, one in five adults over the age of 55 could have estates large enough to bring their heirs into the IHT net. That partly reflects the government’s plans to freeze the IHT threshold – the value of estates above which IHT is payable – at £325,000 until at least 2030. But the bigger impact comes from changes to the rules on pension assets. At present savings in private pensions fall outside of your estate for IHT purposes, meaning they can be passed on to your heirs with no tax to pay. From April 2027, however, this will change. Any savings or investments remaining in your private pension accounts at the time of your death…

These are tough times for big retailers. They are beset by the cost of living, uncertainty about the global economy and rising staff costs, especially after the recent increase in employers’ national-insurance contributions. However, some well-run retailers have managed to rise above the turbulence. One of these is Dunelm Group (LSE: DNLM), which we successfully tipped three years ago in issue 1114, selling in 1152 for a profit of £789. This proved to be a wise decision, as for the next two years the stock largely trod water. Lately, however, it has started to take off, so this is a good time to consider another punt. Dunelm sells home furnishings, ranging from furniture and garden equipment to bedding. Over the past few years it has demonstrated a knack for finding…

“Transco owns the biggest gas pipeline in the US; it stretches from Texas to New York” North American midstream energy infrastructure has been a standout in the energy sector, generating strong free cash flow and returning capital to investors via growing dividends and buybacks. These companies, which transport, process, and store hydrocarbons, benefit from fee-based revenue under long-term contracts, supporting stable, predictable cash flows. Midstream energy infrastructure is especially well positioned to benefit from rising demand for natural gas, particularly through liquefied natural gas (LNG) exports. North American LNG-export capacity is expected to more than double by 2030. Meanwhile, America’s demand for electricity is climbing for the first time in nearly 20 years (driven by electrification and data centres), boosting natural gas-fired power generation. The Alerian Midstream Energy Dividend UCITS…

Howard’s Folly, Reserva Branco, Alentejo, Portugal £192, reduced to £153.60 for Wine Club Members, per six bottles, howardsfollywine.co.uk. You can also order it for delivery in Portugal from the Portuguese website I cannot think of a finer Portuguese white wine. I was fortunate to be shown a preview of this brand-new release during my visit to the winery in Estremoz last month. It struck me, on the very first sip, that this is one of the most complete, refreshing, complex and unique flavours in the wine world. My featured Howard’s Folly reserve white is on my shortlist, but it’s not a cheapie, nor is it stocked in supermarkets. Instead, this is a grand, layered, mineral-soaked beauty with an expansive perfume and heavenly flavour. It enchants the senses and yet remains…

Oil shock averted? World leaders and commodity traders have spent the past fortnight on edge as the long-running Iran-Israel conflict turned hot. Matters came to a head at the weekend when the US directly entered the war, bombing three Iranian nuclear facilities with fearsome bunker-buster bombs (see also page 8). That dramatic escalation gave the lie to the popular notion that Donald Trump is a “chicken” (“Trump Always Chickens Out”, or TACO, as traders say), says Simon Nixon on Substack. In the grand scheme of things, few geopolitical events have a material impact on markets. But those that do – the 1970s oil crisis, or Russia’s 2022 invasion of Ukraine – have had devastating economic effects. A “very weak” riposte American B-2 Spirit bombers had breached Tehran’s reddest of red…

“Markets can go through long stretches that are neither bullish nor bearish. They can also go sideways. In fact, an extended flat market can wring out excesses just as well as a bear market, just not as quickly. I wrote in late 1999… that I thought the S&P would be flat for the decade. I was considered too bearish. It turned out I was right… there are basically two things that can happen to a market as richly valued as [the current US] one. One is that the momentum fades, but a crash doesn’t follow. People who grew accustomed to buy/hold/forget won’t like it, but will be slow to give up. The other possibility is a true bear market… [Still] typically, bear markets don’t happen outside of a recession… while…

Tesla’s driverless Model Y robotaxi “finally hit the road this weekend”, says CNBC’s Samantha Subin. The company launched rides in Austin, Texas, opening the service to a limited number of the electric-car company’s fans and shareholders. While some had no problems, other road users and researchers saw the robotaxis “appearing to violate traffic rules”, with one car allegedly briefly travelling down the wrong side of the road and another braking in the middle of traffic. CEO Elon Musk has said that Tesla aims to have “hundreds of thousands, if not over a million” self-driving cars in the US by the end of next year. Musk is certainly talking up a “rosy future” for the brand, says Katie Prescott in The Times. He argues that Tesla’s advantage “lies in its ability…

Argentina’s president Javier Milei has successfully implemented a pro-market agenda, says WirtschaftsWoche. His programme includes the deregulation of the energy sector, which implies more exploration of the Vaca Muerta basin in Patagonia. It contains the world’s second-largest shale gas and fourth-largest shale oil reserves respectively. Enter Vista Energy, based in Mexico City but focused on Argentina. In the first quarter it produced 81,000 barrels of oil equivalent, a 47% year-on-year rise. Exploration costs of just $4.70 a barrel and distribution costs of $6.40 a barrel help explain why net income reached $82.8m. There should be plenty more where that came from.…

On Monday, Keir Starmer unveiled the government’s long-awaited ten-year industrial strategy. Green levies will be scrapped for roughly 7,000 businesses, grid connections speeded up, and about 500 of the most energy-intensive firms will have their network charges further discounted to 90%, says Charlotte Edwards in the BBC. Starmer told the BBC this would give British businesses the certainty they need to “invest, innovate and create new jobs”. Labour has been struggling to deliver its promised economic growth after “hitting” businesses with a £26bn tax on jobs and a higher minimum wage, says Philip Aldrick in Bloomberg. Energy-intensive businesses will still have to wait for a “two-year consultation period” to see if they are eligible, and energy prices are still likely to be higher than they are in Europe, says Ashley…

British businesses, along with many others across Europe, have always seen the US as the one market they really wanted to crack. It was where they could turn themselves from a regional into a global company. That has started to change. The US has dropped out of the top three destinations for British manufacturers for the first time in a decade, according to a survey by Made UK. Only 4% of UK-based manufacturers said they would currently consider setting up an operation in the US. Investors are looking elsewhere as well, with a flood of fresh money moving into Europe as the major funds rotate out of US assets. British exports to the US dropped by £2bn in April, according to the Office for National Statistics, the largest monthly fall…

According to a concept called the time value of money, cash that you’re promised in the future is worth less than cash received today, because you can invest today’s money so that it grows tomorrow, or spend it on a larger quantity of goods than you could in the future (assuming that inflation and interest rates are positive, which is not always the case). For example, if you have £1 and can invest it at an interest rate of 5%, then in a year you will have £1.05. This means the future value of £1 in one year is £1.05. Put it the other way around and the present value of £1 received in one year is £0.952. This is because £0.952 is the amount that would grow to £1,…

“You’re worth what someone decides to pay you. There’s a lot of debate about players taking the money to play in Saudi Arabia, but you can’t walk in their shoes. You don’t know if they’re giving that money to the town they came from or building schools. So many players do that, but it doesn’t get the coverage because it’s not exciting. And in terms of entertainment, would you apply that to the music industry and say Elton John isn’t worth that money, or that movie star isn’t worth it for a film?”Television presenter Gabby Logan (pictured) on pay for top athletes, quoted in The Times “Generally, actors don’t talk about pay in public because it’s ridiculously disproportionate to what we do— putting on makeup and funny voices – and…

fee.org The Karate Kid lives on in the form of the release of Karate Kid: Legends, says Kimberlee Josephson. But the original films of the 1980s instilled lessons that will resonate with youths squaring up for the battle of life in the workplace today. In the first film, Daniel LaRusso (Ralph Macchio), aka Daniel-san, became an “unlikely hero empowered by the wit and wisdom of Mr Miyagi” (Pat Morita). Miyagi agrees to train Danielsan in the art of karate to help him stand up to hoodlums. But the first thing Daniel has to learn is patience. Acquiring new skills takes time. “First learn stand. Then learn fly.” After many hard days of toil, Daniel complains that Miyagi is taking advantage of his labour. Miyagi replies “not everything as it seems”,…

● Henderson European Trust (HET) is to merge into Fidelity European Trust (FEV) following the surprise resignation of HET’s managers from Janus Henderson earlier this year. The surviving trust, which will be run by Fidelity, should have around £2.1bn in assets, depending on how many of HET’s investors take up an option for a cash exit. Meanwhile, European Smaller Companies Trust (ESCT) is to combine with Columbia Threadneedle’s European Assets Trust (EAT). Janus Henderson will run the merged fund, which should have around £780m in assets, again depending on uptake of a cash exit option. ● Nick Greenwood has stepped down from MIGO Opportunities after two decades as part of an overhaul of the £70m trust’s strategy. MIGO, which buys other trusts at deep discounts to net asset value (NAV),…

Self-employed workers who have missed out on the UK’s auto-enrolment revolution could be offered a parallel version of the scheme to help them save more for old age. Nest Insight, one of the largest workplace pension providers, says self-employed people could be offered an “auto-save” scheme to which they are signed up unless they have actively chosen to opt out – in the same way as employers automatically enrol new workers into their schemes. Self-employed workers would then automatically pay a set percentage of their income into the scheme each month, building up pension entitlements in the same way as their employed counterparts. While they wouldn’t benefit from an employer’s pension contribution, the value of their own savings would grow over time as the scheme provider invests it. Nest’s proposals…

This year is a quiet one for US elections as it falls between last year’s presidential election and next year’s mid-term vote. One of the few taking place is to choose the next governor of New Jersey. A few weeks ago, both parties had their primary elections to select the candidates who will take part in November’s election, with Mikie Sherrill coming top of the Democratic pile and Jack Ciattarelli winning the Republican contest. At present the pundits have Sherrill as the strong favourite, with Ladbrokes putting the odds of her winning at 1/5 (83.3%); Ciattarelli is out at 10/3 (23.1%). That might seem unfair on Ciattarelli as Donald Trump shocked pundits when he did much better in New Jersey at the last presidential election than any Republican since 1992…