Table of contents for Issue 1289 in MoneyWeek

UK gilt markets swallowed last week’s Budget with little drama. Trading at 4.47% this week, the government’s ten-year borrowing costs have dropped a quarter of a percentage point since early October. The pound enjoyed its “best week in three months” following the Budget as investors cheered an “improved fiscal outlook”, says Marcus Ashworth on Bloomberg. Long-dated bond yields served up “their biggest drop on a Budget day in 19 years”. At 5.2%, UK 30-year gilts pay a decent premium to their French or US equivalents. Yet bond vigilantes aren’t piling into this apparent bargain. The problem is investors’ “mistrust” of Reeves and Starmer, whose stealth-tax rises seem designed to save their political careers. They have failed to convince markets they actually understand “how capitalism works”. Yields on long bonds have…

US stocks are historically expensive. A common way to value stocks is by comparing the last 12 months of earnings to the current price. This is known as the price/earnings (p/e) ratio. But this measure can be distorted by one-off factors, such as this year’s tariff panic. A more reliable approach is to smooth earnings over the business cycle. To do this, American economist Robert Shiller developed the cyclically-adjusted price/earnings (CAPE) ratio, which averages earnings over the past ten years. On this basis, US stocks trade at an eye-watering level of 40.2, compared with 31.5 just before the 1929 Wall Street crash and not far short of their dotcom era record of 44.2. Reversion to the historical mean of 17.3 would be exceedingly painful.…

DIY group Kingfisher, which owns 2,000 stores in eight countries, including the B&Q and Screwfix brands, has raised its annual profit guidance, says Isabella Fish in The Times. It will now make between £540m and £570m in pre-tax profits in the year to 31 January 2026, up from an earlier estimate of £480m-£540m. Kingfisher also said total group sales rose 1% year on year in the three months to 31 October thanks to strong demand for “big-ticket” items as well as “progress in strategic initiatives and our cost and margin discipline”. But it also warned of “softening market conditions” in the UK and Poland, along with “high inflation and potential tax rises”. Kingfisher makes a “fair” point when it claims its improved profits are basically a “self-help job”, says Nils…

Indian specialist eye-care chain ASG Hospital is considering an initial public offering (IPO) next year that could raise about 35bn rupees (£295.4m), says Bloomberg. This could value the company, backed by private-equity firms General Atlantic and Kedaara Capital, at around $2.6bn. The potential listing would follow other services companies going public recently in India’s booming IPO market, which has raised about $19.5bn so far this year after generating a record $21bn in 2024. The float will include new and existing shares, but the founders will retain their stakes. ASG, established in 2005, operates over 167 speciality eye hospitals in 83 cities across India.…

London HSBC shambles: HSBC, Europe’s biggest bank, has “caught the market by surprise” in appointing Brendan Nelson (pictured), its interim chairman, to the permanent role, says Pui-Guan Man in The Telegraph. It had appeared to rule him out. HSBC’s “inability to recruit a high-profile successor, after more than a year of searching for contenders, is likely to attract scrutiny”. It is also unclear why the bank has “snubbed” the former chancellor George Osborne. HSBC has its headquarters in London, but makes much of its revenue in Hong Kong and China. “The relationship between Britain and China has cooled in recent years, making diplomatic skills essential for addressing the geopolitical challenges that come with leading HSBC.” Osborne had pursued a “new ‘golden era’ of relations” with China as part of David…

● TT Electronics “looks like an early Christmas present” for investors, but “there’s a grinch” lurking, says Alistair Osborne in The Times. The shares are trading at around 130p, despite an agreed bid of 150p from Switzerland’s Cicor Technologies. The snag is that DBay Advisors, TT’s biggest investor, is threatening to vote down the deal, which requires 75% support. The situation is messy. DBay has made three offers for TT at up to 130p, and rejecting Cicor’s bid might give it the chance to try again. On the other hand, Cicor could choose to turn its proposal into a straight offer that needs only 50% support. However, that might leave DBay as a “pesky minority investor refusing to sell”, which isn’t ideal for either side. Still, the cost of DBay’s…

Christopher Wood, global head of equity strategy, Jefferies “I prefer to play AI in China right now,” says Christopher Wood, the veteran global strategist at investment bank Jefferies. “In AI, you need two things: you need compute and power… China is far more ahead in energy than the US is ahead of China in compute,” he tells CNBC. The US hyperscalers – giant cloud-service providers such as Alphabet, Amazon and Microsoft – are shifting from being asset-light to asset-heavy businesses due to the scale of their investments, he says. “They’re terrified of being disrupted, and they feel they have no choice but to play the game… there’s a fear of missing out.” Chinese firms are taking a different approach, as shown by the release of the low-cost, high-performance DeepSeek AI…

Tetragon Financial (LSE: TFGS) is one of the most exotic investment trusts on the London Stock Exchange, with a unique approach both to investing and corporate governance. Its total returns are virtually unmatched, which makes it interesting to review regardless of whether the latter will put one off. Since listing in April 2007, it has produced a total return on a net asset value (NAV) basis of 568%, compared to 276% for the MSCI All Country World index. Tetragon was originally co-founded by hedge-fund managers Reade Griffith and Paddy Dear to invest in the then-booming collateralised debt obligation (CDO) market. In the aftermath of the global financial crisis, it reinvented its strategy and today invests across a wide range of asset classes. It is far more complex than most vehicles…

Trustpilot (LSE: TRST) is a unique business on the UK stockmarket. It sits at the intersection of technology and consumer confidence by helping people to make better-informed choices, while giving companies a seal of credibility. Its platform allows users to rate and review businesses they have bought from, creating a feedback loop that benefits both sides. The firm earns its living by selling subscriptions to businesses that want to access review data and use Trustpilot’s marketing tools to boost their reputation. Start-up goes global Trustpilot was founded in Copenhagen in 2007 by Peter Holten Mühlmann, then a university student. His idea came about as he observed his parents’ struggle to trust companies they were buying from online. His start-up set out to bring transparency to online commerce by letting customers…

● If your business is set up as a limited company and you pay yourself through company dividends, you’ll pay more tax from next April under changes announced in the Budget. The basic rate of income tax due on such dividends will rise from 8.75% to 10.75% on 6 April and the higher rate will rise from 33.75% to 35.75%. The additional rate, meanwhile, remains at 39.35%. While you’ll still be entitled to receive £500-worth of dividends tax-free each year, the changes reduce the attractiveness of limited-company status from a tax perspective; you may be better off working as a sole trader. ● Many owners of small companies that employ people will also face higher costs from next April onwards. Budget increases in the minimum wage – particularly for younger…

James Watson, the Nobel-prize-winning scientist who discovered the structure and significance of DNA and hence revolutionised science, died this month at the age of 97, says The Telegraph. At school, Watson (pictured) was an “unpopular child” with a “precocious intellect” and a “fondness for speaking his mind”. Those traits endured into adulthood, for both good and ill. For good, because he had a brilliant scientific mind. He entered Chicago University aged just 15 and took a doctorate on viruses at Indiana University. But he tired of his studies and gravitated instead towards the emerging field of genetics. In 1952, aged 23, he heard that Cambridge scientists were working on the structure of proteins and moved there with the idea that solving the structure of DNA might help. He hooked up…

How I Made £1 Million in 90 Days Oobah Butler Now streaming on Channel 4 Browse through YouTube or TikTok for an afternoon, or go to the self-help section of any bookshop, and you will see that there’s no shortage of business gurus who claim that it’s possible to make your first million in a few weeks, with just a bit of hustle. But is that advice remotely realistic in real life? Prankster Oobah Butler puts the gurus to the test in this Channel 4 documentary by setting himself the task of making £1m in just 90 days, with only two constraints – that any necessary expenditure comes out of Butler’s own pockets, and he can’t break the law. Butler treats the challenge as a joke initially, setting up the…

If a foreign power – or aliens – wanted to wreck our economy, why waste time and money on firepower? All they would have to do is cut off our access to funny-money credit. Auto sales would stop. House building sites would go quiet. Restaurants and hotels would be safe spaces for mice and cockroaches. Millions of people would be out of work. There would be long lines at the food banks. It’s credit that makes the world go around today. Americans’ household debt levels – including mortgages, car loans, credit cards and student loans – are now at a new record high, according to the Federal Reserve Bank of New York. Total household debt reached $18.59trn from July through September of this year, up by $197bn from the previous…

“I will have everyone work like a horse,” declared Sanae Takaichi shortly before taking over as Japanese prime minister in October. Takaichi’s vow to “work, work, work, work, work” has been selected as Japan’s “catchphrase of the year”, says Justin McCurry in The Guardian. Yet her workaholism is not going down well in a nation so infamous for long hours that karoshi – death from overwork – is a recognised social problem. Stagflation is “ruining Takaichi’s honeymoon”, says William Pesek in Nikkei Asia. GDP contracted 0.4% in the third quarter and inflation is running at 3%. Life is good for the one-percenters who own lots of shares: the Nikkei has risen 26% this year in local currency terms. But the inflation pain is stoking huge resentment among households of more…

Netflix has “dramatically intensified” its pursuit of Warner Bros. Discovery, says Adrienne Martinez in the International Business Times. It has made an enhanced cash-heavy bid in a move “that could alter the balance of power in Hollywood”. The competition is “fierce”, with Paramount Skydance Corporation and Comcast also in contention. If Netflix is successful, it would mark a historic moment for both it and Hollywood, “representing one of the largest potential mergers in the entertainment industry and highlighting the ongoing consolidation between traditional media and streaming platforms”. Owning a “coveted film and TV archive” would reduce Netflix’s reliance on outside content providers, who still account for half of what it offers customers, says Jennifer Saba on Breakingviews. But the bid looks “odd”: the company has “never paid even $1bn for…

Five to buy Rio Tinto The Times Rio Tinto’s short-term profit outlook is lacklustre thanks to global uncertainty, but the mining giant’s solid finances will help it navigate turbulence. The stock trades on a low valuation and offers scope for a rerating. It also boasts a high dividend yield of 5.6%. Rio has been skewing towards commodities such as copper, lithium and iron ore, which are likely to be in high demand amid the shift towards decarbonisation. 5,391p Close Brothers The Times Investors’ fears about the impact of the motor-finance scandal on Close Brothers recently caused its stock to plummet, forcing the merchant bank to take several emergency steps to bolster its balance sheet. But the worst may be over, and the City’s regulator is nearing a resolution. Close said…

What happened? Taxes are up – a lot: another £26bn a year by 2029, drawing millions more into higher tax bands. That’s almost as big as the £32bn raised in last autumn’s Budget, with its job-destroying increase on employers’ national insurance contributions. Spending is going up, as a political choice, as is borrowing. Thanks to the higher taxes, fiscal headroom will double to £22bn – this is the amount by which government can increase spending or cut taxes without breaking its own fiscal rules, in this case, to have national debt falling as a percentage of GDP within five years. Most of the spending increases will happen up front, while the tough fiscal consolidation (threshold freezes, other tax rises and spending restraint) is pencilled in for the future. Reeves’s choices…

“There is a great deal of ruin in a nation,” wrote the economist Adam Smith, meaning that a successful country can withstand a lot of mistakes and incompetence before it is destroyed. He did not, of course, intend it as an open invitation to politicians to try their worst. That point appears to have been lost on every British government of the past decade. The latest Budget (see page 14) is a deeply dispiriting one: anti-growth, anti-optimism and anti-investing, as Andrew, Kalpana and I discuss on the new MoneyWeek Talks podcast (moneyweek.com/podcasts). It goes without saying there was nothing to alleviate growing fears of long-term economic decline. What felt like a new low was the undermining, for no obvious reason, of things that still work. The reversal of much of…

How China boosted progress Editorial The Economist China is “pressing ahead” not only in electric vehicles, solar panels and open-source AI, but also self-driving vehicles and medicines, says The Economist. China’s robotaxis, made for a third of the cost of Waymo’s in the US, are “racking up millions of kilometres” and “forging partnerships in Europe and the Middle East”. The country is now the world’s second largest drug developer. China’s “deep pool of talent, a broad manufacturing base and huge scale, combine to propel it rapidly up the value chain”. China’s “nimble and permissive regulators” have “turbo-changed progress”. By quadrupling the drug regulator’s workforce between 2015 and 2018, a backlog of 20,000 new drug applications was cleared in two years. Last year Chinese firms ran a third of…

The proposed £5.3bn merger of HICL Infrastructure and the Renewables Infrastructure Group (TRIG) has been called off following a shareholder revolt led by Capital Gearing Asset Management. The deal to create Britain’s largest listed infrastructure trust would have opened up new growth opportunities, claimed the two trusts. However, critics argued that a merger had little logic since HICL and TRIG invest in very different areas of infrastructure, while the terms favoured TRIG shareholders over those of HICL and also benefited InfraRed Capital, the manager of both HICL and TRIG, by preventing a continuation vote at TRIG next year. The high-profile collapse of the deal is likely to prompt bid interest in both HICL and TRIG, say analysts.…

All chancellors are adept at giving with one hand and taking with another. Rachel Reeves is no exception. In last week’s Budget, she handed small businesses in England a seemingly attractive cut in the level at which business rates are charged, but most firms are likely to end up paying more overall because of other changes. Working out your bill for business rates – a tax charged on most non-domestic properties, such as shops, offices, pubs, bars and restaurants – can be tricky. But you need to start with the “rateable value” of the property that your business occupies; this is an estimate of its annual rental value, made by the government’s Valuation Office Agency (VOA). This rateable value is then multiplied by a figure set by the government to…

“Ryanair boasts the lowest cost base of any major airline” Europe presents a mixed backdrop, with varied political priorities and differing fiscal positions across major economies. Yet many European companies are global leaders in their fields and continue to grow despite muted domestic GDP and new US tariffs. These firms often generate earnings well beyond Europe’s borders, operate in niche markets where expertise matters and provide essential products and services that remain in demand regardless of short-term uncertainty. The European Opportunities Trust (EOT) invests in a focused number of “special” European businesses that the manager believes have limited downside and can grow consistently over many years. The trust looks for companies with strong competitive positions, global reach and business models that remain relevant through economic cycles, resulting in a portfolio…

“Just before Halloween, Nvidia made headlines for becoming the first $5trn company in history. A week later, Tesla’s shareholders approved a pay package for Elon Musk that could be worth about $1trn in a decade. At a certain point, figures this large become… meaningless… Try to imagine how rich you would be if you were pulling in $8bn every month for the next ten years, as Musk is effectively about to do… the planet didn’t even have a single trillion-dollar company until Apple hit that milestone in 2018. As a species, we aren’t ready for this. People basically can’t tell the difference between any number that ends in ‘-illion’, and the more zeros you add, the worse things get. One experiment… asked a group of [university] students and graduates to…

Barrick Mining is considering selling a minority stake in its “prized” North American gold assets, says Robb M. Stewart in The Wall Street Journal. The idea is to float a new firm housing these North American assets, which consist of operations in Nevada and the Dominican Republic. The division accounts for more than half of its gold production. The move follows the decision of activist investor Elliott Management to build a significant stake in Barrick in the hope of a breakup. Floating a minority stake in the North American assets could “bring in new investors” by offering shareholders two companies. Barrick “was already shaking itself up” before news of Elliott’s stake broke in November, says Lex in the Financial Times. But the “tap on the shoulder” from the activist investor…

“Don’t buy gold miners in a gold rush; buy picks and shovels instead,” says an old investment adage. It applies to the AI-infrastructure boom, too, says WirtschaftsWoche. Data centres need not only chips but also ample supplies of electricity. To produce and distribute electricity we need copper, and hence copper miners. One promising example is Canada’s Lundin Mining, which produces the red metal in Argentina, Brazil, Chile and the US. With expected output of up to 337,000 tonnes this year, the group is among the top-20 copper producers in the world. It is part of the holdings of the Lundin family, a raw-materials dynasty.…

Donald Trump has raised expectations of military confrontation in Venezuela by saying the US will start taking action to stop alleged drug-trafficking networks on land “very soon”. On Saturday, he said Venezuela’s airspace should be considered closed. Washington has “poured troops” into the region, with 11 warships, some 15,000 personnel and 100 warplanes standing ready, says Rob Crilly in The Telegraph. Tensions started escalating in September, since when more than 80 people have died in lethal US strikes against 21 alleged drug-trafficking boats in the Caribbean, says Michael Drummond on Sky News. Venezuela’s president, Nicolas Maduro, denies Trump’s accusations that he is running a drug-trafficking gang and says that Trump is “fabricating” a war to effect regime change. He has deployed troops along Venezuela’s coast and the border with…

JPMorgan Chase could have chosen Paris, Frankfurt or even Amsterdam. Yet the giant US bank has decided to build a new £3bn European headquarters in London’s Canary Wharf instead. That is a huge vote of confidence in London and the City at a time when faith in the British economy has reached its lowest point in recent memory. It is also a sign that the Brexit wars have finally been won – and the City will remain the key financial hub for Europe. Given the UK’s recent dismal track record of delaying any kind of new project, and allowing costs to escalate with dozens of unnecessary regulations, it may be a few years before the diggers and cranes actually get to work. Even so, with 12,000 square feet of space,…

Stockmarket returns are often quoted on the basis of price return – the gain or loss in the price of the shares that make up the index. However, investors will also receive dividends from most companies and over the long term this can amount to a much larger element of returns than the capital gains. The total return from an investment takes into account income received from dividends or interest from bonds or other sources. Total returns are usually calculated on the assumption that any income received is invested back into the market. Over a short time frame, the difference between total return and price return will usually be small, unless you are looking at investments with a relatively high yield, such as high-yield bonds. But over several years, the…

“There’s no correlation between talent and success.” Hollywood star George Clooney (pictured), quoted in The Sunday Times “It is a luxury to not have to worry. Ever since I won £1m, I haven’t worried. I realised I could relax. It really did make a difference. I began enjoying myself again.” Judith Keppel, a winner of Who Wants to Be a Millionaire?, quoted in The Sunday Times “When the people shall have nothing more to eat, they will eat the rich.” Jean-Jacques Rousseau, quoted in The Bulwark “The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal division of misery.” Winston Churchill, quoted in The Christian Post “I needed the space to just figure out who I was as a performer and…

● Shares in Digital 9 Infrastructure fell by nearly 30% after another investor in Arqiva – the UK broadcasting infrastructure firm that is the largest holding in its portfolio – sold its own stake at a price far below Digital 9’s valuation. Digital 9 says that Arqiva’s value is “highly sensitive” to several factors, including the government’s consultation on the future of TV distribution, which is due by the end of 2027, and broadcasting contract renewals, and it does not intend to sell until these are resolved. The trust entered wind-down in January 2024, after which it has seen a series of disappointing disposals and a dispute with former manager Triple Point. The shares have fallen 93% in the past three years and trade at an 80% discount to NAV.…

The structure of an investment trust lends itself to income investing. Not only do they give investors access to a well-diversified portfolio of income stocks, but they can also pay dividends out of both capital and income, unlike ETFs and other open-ended investments. That means trusts are more likely to be able to sustain their dividends in periods of market volatility. Trusts with a global mandate also have far more flexibility in where they can invest so they can pick the best income, quality and growth plays in the world. JP Morgan Global Growth and Income (LSE: JGGI), Murray International (LSE: MYI), Scottish American (LSE: SAIN) and STS Global Income & Growth (LSE: STS) all have a global mandate. Ecofin Global Utilities and Infrastructure (LSE: EGL) has a global mandate…

The UK is very good at starting new companies, but too few of these new firms achieve their potential. State support aimed at helping firms gain scale could help. One important initiative is the expansion of the Enterprise Management Incentive (EMI), a scheme designed to help small companies attract and retain the best people. The EMI, which allows these firms to give staff shares via tax-efficient arrangements, will now be open to larger businesses. They may offer the EMI as long as their gross assets aren’t worth more than £120m, up from £30m now, and if they don’t have more than 500 employees, up from 250. An easing of the venture-capital-trust (VCT) rules could help too. VCTs are investment funds that offer their shareholders generous tax perks in return for…

2024 Argiles Blanc, Domaine Saint Gayan, IGP Méditerranée, France Finding La Cabane (below) spurred me on to pair it with a worthy white partner – a wine that could perform at the most exultant level of entertaining for all palates and as wide a range of cuisines as possible. This year’s challenge was far from straightforward. There are thousands of inexpensive, anonymous, rudderless whites on the shelves, lacking identity, let alone a sense of place. MoneyWeek’s wine lovers deserve wines that hold their attention for the whole bottle, not just the first sip, and this year’s champion hails from a spectacular winery in the southern Rhône that makes far more red than white wine! Made from piquepoul blanc, bourboulenc and grenache blanc, the perfume is haunting, the palate blessed with…

Fixed Why Personal Finance is Broken and How to Make it Work for Everyone John Y. Campbell and Tarun Ramadorai Princeton, £25 In finance the theory has long been that people are rational agents able to make optimal decisions when it comes to their own money. An implication is that, apart from preventing outright fraud, the best way to ensure the financial system works as efficiently and equitably as possible is for governments to stand aside and let the market mechanism get on with it. But as John Y. Campbell and Tarun Ramadorai argue in this book, in the real world both those assumptions are flawed. When it comes to their own finances, people in fact tend to be irrational, not to mention plain ignorant, and rely on emotion and…