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MoneyWeek Issue 1005

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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
Dennis Publishing UK
R 90,36
R 2 149,51
51 Issues

in this issue

3 min.
from the editor-in-chief...

If you had put $100 into big US growth stocks on 31 December, 2019, you would now have $111. Shares in these companies are currently trading not so much as though Covid-19 doesn’t exist, but as though its existence has been a positive for their businesses (which you can argue – they’re mostly tech stocks) and as though they were not already overpriced in December (harder to argue). Look at the speed and scale of the recovery of many of these stocks since March – and they are the ones most discussed in the media – and you will have only one thought: “There’s a bubble out there.” There is still value to be had Not so fast. Do not for a second think that just because US tech stocks are suffering…

1 min.
a billion-dollar shocker

When hedge fund manager CQS held a call in early April to update investors on the 33% loss suffered by its $3bn flagship Directional Opportunities fund during March’s market turmoil, fund manager and founder Michael Hintze (pictured) was nowhere to be seen, says the Financial Times. Investors were disappointed, demanding an explanation for why the fund had lost $1bn — its biggest monthly loss in its 15-year history. On a call earlier this month, Hintze explained what happened, reports the FT. When coronavirus panic hit, many of CQS’s structured credit bets (investments in riskier derivatives of corporate debt) “turned sour”, driving almost all of the losses in March. Unfortunately for investors, he also reduced exposure to stocks, thus missing out on much of the rally in both April (the best single…

1 min.
good week for

Sir David Attenborough (pictured) is leading an appeal to raise £12m to save London Zoo, says Elisa Menendez in Metro. The zoo is at risk of permanent closure after it was forced to shut for 12 weeks during lockdown. The fundraising campaign is part of a £25m rescue package to save more than 18,000 animals at risk. Culture vultures will be deprived no more: museums, galleries and cinemas will be allowed to reopen from 4 July (see page 10). A report by the Creative Industries Federation showed the sector suffered heavy losses due to coronavirus lockdowns; the sector is set to lose £74bn in revenue, a 30% drop over last year and a loss of 406,000 jobs in 2020, says Martin Bailey in The Art Newspaper.…

1 min.
bad week for

A painting of the Immaculate Conception by 17th-century Spanish artist Bartolomé Esteban Murillo suffered a botched restoration this week, prompting calls for rules governing renovation to be tightened, says Isambard Wilkinson in The Times. The painting’s owner paid €1,200 for the makeover, but the work of the baroque artist “was returned to the owner almost unrecognisable”. Clothing chain Eddie Bauer, film distributor Magnolia Pictures and ice cream brand Ben & Jerry’s joined a growing advertising boycott that is targeting Facebook’s content moderation practices, says Tiffany Hsu in The New York Times. Patagonia, the North Face, and REI previously pulled away after Facebook declined to take action against misinformation spread on the website. Facebook generates nearly all its revenue from advertisements.…

5 min.
investors beware: inflation will return

Central bankers are behaving like “an ostrich putting its head in the sand”, says Charles Goodhart on voxeu.org. The guardians of the world’s currencies have unleashed unprecedented monetary stimulus in response to the pandemic. The US Federal Reserve’s balance sheet has soared by about $3trn since March to over $7trn, more than one-third of US GDP. It could be close to $10trn by year’s end. At £700bn, the Bank of England’s balance sheet is worth roughly one-quarter of Britain’s national income. History shows that “the correlation between monetary growth and inflation” is “as long as your arm”. Yet markets and many economists are strikingly blasé about the risks. CPI could spike… For the moment inflation is quiescent. The annual pace of UK consumer price inflation (CPI) in May was just 0.5%, the…

1 min.
will it be 2008 all over again?

Are we heading for another financial crisis? asks Frank Partnoy in The Atlantic. Readers will remember collateralised debt obligations (CDOs) from 2008. These securities, which packaged together US mortgages, caused billions of dollars in losses at banks. Now we have the CLO, or collateralised loan obligation. A CLO “walks and talks like a CDO”, but instead of home loans they are backed by business loans. In the place of “subprime mortgages”, we have “leveraged loans” made to “troubled businesses”. The CLO market is bigger now than the CDO market was in 2007. About half of borrowing in the $2trn US corporate leveraged loan market has been securitised as a CLO, says Telis Demos in The Wall Street Journal. Most are structured defensively and senior holders would be unlikely to lose principal…