MoneyWeek 1051

MoneyWeek is a weekly magazine that enables you to become a better-informed, smarter investor and enjoy the rewards of managing your money with confidence. Week-in, week-out we'll guide you through the financial world as it changes, alerting you to all the opportunities to profit and dangers to avoid, as they appear. Income strategies, rising-star companies, the best funds and trusts, clever ways to preserve your wealth during market turmoil... you will get the best ideas from the sharpest financial minds and investing professionals in Britain.

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United Kingdom
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3 Min
from the editor-in-chief...

“Real companies making real things and real money – money they can pay out to you” Hendrik Bessembinder. You might not know his name. But everyone in fund management does. Scottish Mortgage’s James Anderson first told me about him three years ago. Until then, Bessembinder had been a relatively obscure academic. Then he published a paper that backed up every hunch Anderson had ever had. The conclusion? That over the long term, all the returns from the US stockmarket came from 4% of listed companies. The rest are pointless. Take that internationally (he did another study a few years ago) and it falls to 1%. You could respond to this information by admitting you haven’t a hope of figuring out which stocks will make up the 1% –or the 4% –and so…

1 Min
royal scandal of the week

The Sunday Times and Channel 4 claim that Prince Michael of Kent (pictured), 78, Queen Elizabeth’s cousin, has been “offering access” to the “despotic regime” of the Kremlin. Undercover reporters posing as executives from a South Korean gold investment business spoke to the prince on Zoom. He promised his “long-standing connection” to Russia “could bring some benefit” to their fictitious company, citing his “Order of Friendship”, “one of the Kremlin’s most prestigious awards”, says The Times. After the prince left the call, his associate, the Marquess of Reading, described the prince as “Her Majesty’s unofficial ambassador to Russia” and said he could “open doors” in return for the £50,000-odd needed to cover a “four or five-day trip to Russia”. After being approached by The Sunday Times, the Marquess said he…

1 Min
good week for

An image of a young girl from 2005 standing in front of a flaming house with a “knowing look in her eyes” has been shared hundreds of thousands of times on the internet, becoming a famous meme nicknamed “Disaster Girl”, says Marie Fazio in The New York Times. Now disaster girl herself, Zoë Roth (pictured), now 21, has cashed in on her infamy. Roth, a college student in North Carolina, sold the meme as a non-fungible token (NFT) for $495,000 last week. She plans to put the money towards student loans and charitable donations. Commercial broadcasters are looking forward to the return of “must-watch TV”, such asthe “pandemic-delayed European Championship and guilty pleasure Love Island” – and the ads that come with them, notes Mark Sweney in The Guardian. A£1bn “advertising…

1 Min
bad week for

Wang Xing, chief executive of Chinese shopping platform Meituan, lost $2.5bn of his net worth after posting to social media parts of a 1,100-year-old poem “about the misguided attempts of China’s first emperor to quash dissent”, says Bloomberg. Wang said the post was a criticism of the tech industry, not the government, yet shares slid – underscoring “how much markets remain on edge” months after a crackdown on tech firms. An unnamed passenger received a $10,500 fine after he blew his nose and coughed into a blanket on a JetBlue flight in the US, says Hellen Coffey in The Independent. He also “repeatedly ignored” instructions to wear a mask. The Federal Aviation Administration has adopted a “zero-tolerance stance towards rule breakers” until at least 13 September.…

3 Min
uk stocks won’t be cheap for much longer

The British economy is poised to enjoy its fastest growth in over 70 years, according to the latest Bank of England forecasts. A successful vaccination programme and continued government fiscal support should help GDP expand by 7.25% in 2021, the fastest pace since at least 1949. The Bank also thinks unemployment will peak at 5.5% this year, a big cut from its previous forecast of 7.75%. Strong growth means no negative rates British stocks surged on the update, with the FTSE 100 topping 7,100 to hit a post-pandemic high last Friday before falling back amid this week’s global sell-off (see below). The index has gained 6% since the start of the year, while the mid-cap FTSE 250 index is up by 8%. “Let’s not get carried away,” says Bank governor Andrew Bailey. Strong…

1 Min
us jobs market is already generating inflation

Global stockmarkets fell sharply early this week, with concern over US inflation. Technology shares were hit particularly hard: the tech-heavy Nasdaq 100 index has fallen by 5% since 1 May. Investors’ US inflation expectations are at a 15-year high, says Naomi Rovnick in the Financial Times. The five-year break-even rate (the difference between the yield on inflation-linked five-year Treasuries and nominal five-year bonds) shows that investors expect average inflation of 2.73% over the next five years, the highest this figure has been since 2006. Spiking inflation could force the US Federal Reserve to tighten monetary policy sooner than expected. That would mean less liquidity sloshing around the market, which is negative for stock prices. Markets were already struggling to digest some puzzling US jobs numbers, says Neil Irwin in The New York…