24 June 2016Issue799 24 June 2016Issue799 control control banks lost How central disaster? for Heading Brexit why Ivotedfor Edward Chancellor: Page 24 Page HOW TO MAKE IT, HOWTOKEEP IT, HOWTOSPEND IT P18

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MONEYWEEK 24 June 2016 Issue 799 Britain’s best-selling financial magazine

From the editor-in-chief… As I write I don’t know fuelled by our unsustainable system of their buyers care more about preserving what the result of the tax credits. We will still have a horrible most of their money than they do about UK referendum on current-account deficit (see our website a guarantee that they will lose a little Europe is. You will for Bernard Connolly’s take on this). of it. That’s just too nuts to last for very have to wait until long. So on page 24, Dan Denning looks next week to hear Our big companies will still be at what might happen next. The answer, MoneyWeek’s views overcommitted (in terms of dividend in a nutshell, is nothing good. “We’re on the actual result promises to shareholders), underinvested at a stage where it’s hard to see how we (though we’ll be giving (capital expenditure has been falling avoid a future monetary crisis. The lower our immediate take on the results in a dramatically) and dependent on the rates go, the more extreme central banks’ podcast on the website on Friday – you’ll kind of corporate cronyism we all say efforts to avoid or escape deflation be able to listen to that or download it at we disapprove of to keep their shows on will become. The more desperate their MoneyWeek.com). However, one thing the road. Our equity market will still be policies, the greater the risk that we’ll see I can say already is that, however we overpriced and horribly vulnerable given destructive levels of inflation.” voted, the actual result will be much the companies’ weak profits. And of course same either way in the short-to-medium The EU referendum has been important term. If we’ve voted in, we’ll be trying “How we deal with the fallout of and it will continue to be important: to reform the EU from the inside (not how we deal with its fallout could make easy at all) and if we have voted out by a the EU referendum could make a huge difference to our long-term small margin we’ll be getting to work on a huge difference to our future. However, it is also a symptom reforming at least our deal with it from long-term future” of a deeper economic malaise across the the outside (easier, but still not that easy). West. And as Dan says in our cover story, we will still be at the mercy of the same in the end that makes it something of a Either way, we’ll be demanding change – grand monetary experiment that has sideshow to the main event: the endgame as will the electorates of many other EU been slowly confusing our economies for of modern monetary madness. countries (see page 20). And regardless the last 20-odd years. from which side we are fudging around with the EU, all our other problems In this week’s cover story we take a break will still be with us. We will still have a from talking about the EU to look at how stunner of a public-debt problem (total we got to where we are now – to a point government debt is knocking around where more than half of all government Merryn Somerset Webb £1.2trn and still rising – see page 5), bonds globally trade on a negative yield: email: [email protected]

Editor-in-chief: Merryn Somerset Webb Executive editor: John Stepek Good week for: Managing editor: Cris Sholto Heaton Microsoft: The software giant has routed more than £8bn in Winner of the week Deputy managing editor: Alex Williams UK sales through Ireland since 2011, saving £100m a year in Mälardalen University, in Markets editor: Andrew Van Sickle corporation tax, as part of an “advance pricing agreement” with Sweden, has been ordered Senior writer: Matthew Partridge by a Swedish court to Contributors: Chris Carter, HM Revenue & Customs, according to The Sunday Times. Mischa Frankl-Duval, Emily Hohler, Jane Lewis, refund US student Connie Sarah Moore, Natalie Stanton Askenback 170,182 kronor Group art director: Kevin Cook-Fielding London Business School: The business school has been able to Picture editor: Natasha Langan end its five-year fundraising drive two years early, after raising (£14,000) in tuition fees, Designer: Sam McMurchie £125m. Jim Ratcliffe, founder of chemicals giant Ineos, who plus interest, after the two- Production editor: Stuart Watkins year finance course she Chief sub-editor: Joanna Gibbs graduated from the school with an MBA in 1980, donated £25m. Website editor: Ben Judge had been on was slammed as “almost worthless” Advertising sales director: Simon Cuff Bad week for: (020-7633 3720) Commercial director: Vinod Avocado lovers: Rising demand for avocados in by the country’s higher Gorasia (020-7633 3664) Publisher: Dan Denning New Zealand has pushed the price per fruit educational authority, Managing director: Helen Hunsperger to NZ$6 (£3), sparking a crime wave – since UKÄ. The court in Founder and editorial director: January, 40 “large-scale” thefts have been Västmanland agreed Jolyon Connell Group publisher: Bill Bonner recorded. An extra 96,000 households bought that the degree that Askenback Editorial queries: Our staff are unable to avocados in 2015, according to New Zealand respond to personal investment queries as Avocados, a growers’ association. had studied for MoneyWeek is not authorised to provide individual from 2011 to 2013 had

Getty iStockphotos Images; investment advice. Email: editor@moneyweek. com Phone: 020-7633 3651 Subscriptions & First-time buyers: Home buyers are being priced out of the “no practical value”. “It Customer Services: 020-7633 3780 Mon-Fri, really feels good. It is an 9am – 5.30pm Web: contactus.moneyweek.com government’s Help to Buy individual savings account (Isa) in many areas of England. The average price of a starter-home important vindication,” said Subscription costs: £69 a year (credit card/cheque), exceeds the scheme’s maximum purchase price of £250,000 Askenback after the verdict. or £19.95 every 13 issues (direct debit). (£450,000 in London), the BBC has found.

Adam Stower. Photos: Stower. Adam MONEYWEEK is published by: MoneyWeek Ltd, 8th Floor, Friars Bridge Court, 41-45 Blackfriars Road, London SE1 8NZ. MONEYWEEK and MONEY MORNING are registered trade marks owned by “The point of philosophy is to start with something so simple as not to seem worth stating, and MoneyWeek Limited. ©MoneyWeek 2016 to end with something so paradoxical that no one will believe it.” ISSN: 1472-2062 • ABC, Jan – Jun 2015: 47,986

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moneyweek.com 24 June 2016 MONEYWEEK 4 news

Washington DC Clinton’s war chest trumps Trump’s: Figures released by another $2.5m; he has now put $46m of his own money America’s Federal Election Commission show that Hillary towards his presidential bid. Republicans, rattled by a turbulent Clinton has an overwhelming financial advantage as she few weeks in which he fired his campaign manager and racially begins her presidential campaign against the Republican abused a judge, will be feeling even more nervous now. nominee Donald Trump. She had $42.5m of cash on hand at the beginning of June, compared with Trump’s $1.3m. In May, Trump raised only $3.1m, while Clinton raked in $26m. Last month also saw Trump lend his own campaign

Palo Alto, California Tesla bids for SolarCity: Elon Musk, the founder and CEO of Tesla, the electric car maker, has announced a $2.7bn all-stock bid for SolarCity – of which he is the chairman and a 22% stakeholder. Tesla’s shares fell by 10% on the news. You can see why, said Lex in the FT. For all Musk’s insistence that electric cars and solar panels are a great match, Tesla shareholders “smelled the deal for what it was”: a bail-out between two Elon Musk companies. Tesla really doesn’t need a solar company, “and if it did, it could have bought a good one”. SolarCity is carrying more than $3bn of debt and it could come close to breaching its covenants, according to Goldman Sachs. Analysts at Oppenheimer & Co expect “a robust shareholder fight over his acquisition”.

The way we live now Brasilia Brazil’s biggest bankruptcy: Oi, Brazil’s biggest fixed-line telephone company, filed for bankruptcy this week, seeking protection from creditors on $19bn of debt. It’s Brazil’s biggest bankruptcy on record. The company had failed to reach a deal on restructuring its debt after a long series of mergers and leadership changes. The group’s performance has gradually deteriorated over the past few years: last year interest costs were almost double operating income. Potential white knights were scared off by expensive obligations that came with the

©iStockphotos business, such as having to It apparently “suits retailers to treat install pay phones throughout men like man-babies whose maturity the area it covers. Other stopped developing around the age of Brazilian companies have also 14”, says Carol Midgley in The Times. come under pressure during the How else to explain products such as recession of the past two years. talking waste-paper bins and Harvey Bankruptcy filings rose by 55% Nichols’ new wheeze: a “man crèche”, last year, and were 100% up or “man park”, for those who hate

year-on-year in May. ©Alamy shopping. It conjures up visions of “man-babies in giant nappies being winded post-temper-tantrum”. London In fact it’s a “gimmicky basement” with Chemring craters: Shares in defence group Chemring plunged by 35% last Tuesday a bar, a TV, Wi-Fi and a games area. after it reported a threefold increase in underlying first-half losses to £4m, and This is a pointless and patronising warned that full-year results would be slightly below expectations. Revenues grew waste of time, as stores have had by 11%, however, and the order book edged up to almost £600m. The fall looks like suitable places for anti-shoppers for an overreaction, said Martin Waller in The Times. Some health and safety issues years. “They’re known as pubs.” In any have restricted output in Australia, but they have now been sorted out. A delay on a case, why should couples go shopping contract to make ammunition for a Middle Eastern client has pushed some expected together if one can’t stand it? profits into the second half. Throw in the long-term prospects of the US defence sector, and the outlook for Chemring is encouraging.

MONEYWEEK 24 June 2016 moneyweek.com news 5

London Karlsruhe, Germany Public finances disappoint: Only the March forecast for 2016/2017 as High Court agrees to OMTs: two months into the fiscal year, the a whole foretold a fall of 23%. A key Germany’s constitutional court has ruled public borrowing figures suggest that problem was slow growth in central in favour of the European Central Bank’s Chancellor George Osborne could government tax receipts, which are rising (ECB) Outright Monetary Transactions struggle to meet his 2016/2017 target. by just 3% year-on-year, half the pace Programme (OMTs). This fire-fighting Public-sector net borrowing came in the government has pencilled in for the tool, which envisaged unlimited at £9.7bn in May, while April’s figure year as a whole. An economic recovery purchases of peripheral countries’ bonds was revised up by £1bn. That means later this year implies a more rapid in order to lower their borrowing costs borrowing in the first two months improvement in the public finances, so and prevent bankruptcy, was never is 0.8% higher than last year, while the forecasts could yet be vindicated. used. But the unveiling of OMTs is credited with bringing the eurozone back from the brink in 2012. German academics, politicians and businessmen had complained that OMTs violated German federal law because they amounted to illegal monetary financing of southern European governments. OMTs have been superseded by quantitative easing (QE), whereby the ECB buys government and corporate bonds across the whole euro bloc. A negative judgement would have called into question the Bundesbank’s role in OMTs, and thus their overall efficacy, in case they are ever needed.

Beijing Walmart goes online in China: The world’s biggest retailer is taking a 5% stake worth $1.5bn in China’s e-commerce giant JD.com. The deal will also see JD.com take over Walmart’s Chinese online grocery store, Yihaodian. Walmart is seeking a “fresh start” in China after its bricks-and-mortar outlets have struggled amid a slowing local economy and a gradual shift to online shopping, said Bloomberg. com’s Shannon Pettypiece.

©Press Association ©Press In 2015, Chinese retail sales grew 10% year-on-year; online sales increased more than 30% and now comprise 13% of the total, or $580bn. Rome JD.com will now have greater scale and PM suffers setback: Italy’s Five Star access to online groceries, allowing it to Movement won most of the mayoral compete better with e-commerce market elections that took place in Italy last leader Alibaba. weekend, gaining control of Rome and Turin. The success of the anti- globalisation, eurosceptic, populist party Ankara, Turkey has dealt a blow to the centre-left Prime Turkey muzzles press: Turkish authorities have arrested three campaigners for press Minister Matteo Renzi, who has been freedom and charged them with spreading terrorist propaganda. The government has trying to push through economic reforms already seized or shut down several newspapers and broadcasters in the past year, so to bolster growth and ultimately reduce this week’s news has confirmed fears that the regime of President Tayyip Erdogan the country’s huge debt pile, worth 132% (pictured) is becoming ever more authoritarian. Erdogan has also accused the of GDP. Renzi is planning a referendum central bank of hampering growth by keeping on constitutional reform in October. interest rates high, which may help explain why it He proposes to reduce the size of the cut interest rates for the fourth consecutive time Senate to facilitate law-making and make this week. A backdrop of falling inflation and a it harder to bring down governments. more stable Turkish lira provided macroeconomic He says he will resign if he loses, which cover for the move, however. The economy grew now looks possible. Five Star is also by 4.5% year-on-year in the first quarter of 2016, pushing for a referendum on Italy’s but a current-account deficit of around 4.2% of GDP membership of the euro. remains a worry. moneyweek.com 24 June 2016 MONEYWEEK 6 markets Japan: the only way is up

by Andrew Van Sickle

This year has not been kind to Japanese equities. The Nikkei 225 index has fallen by around 15% so far, while the broader Topix index has lost almost a fifth, its worst start since 1995. Foreign investors have been heading for the exits. They have sold around $93bn of Japanese stocks in the past year, as the FT’s Leo Lewis points out. And they may not be back in a hurry. Last month’s Bank of America Merrill Lynch survey of global fund managers shows that they are more bearish on Japan than at any stage since late 2012.

The main problem has been the ©Alamy strength of the yen, a result of a flight to Japan is doing everything in its power to cheer investors safety during the global growth scare. It rose by almost 7% against the dollar below zero. Monetary easing tends Perhaps most encouragingly there has between January and March, the biggest to weaken the currency, while the been a corporate governance revolution quarterly jump since 2009. This bodes ill extra liquidity finds its way into asset in Japan. This entails companies being for the Japanese market’s heavyweight markets. The Bank of Japan could also more accountable to shareholders, and exporters. More broadly, three years of contemplate even more radical policies. – crucially – returning spare capital to Abenomics, the stimulus programme them if it can’t be put to good use, rather named after Prime Minister Shinzo Abe, Artificial stimulus aside, however, the than hoarding it. As a result of this shift, has yet to shake Japan out of its long economy is hardly a write-off. The and thanks also to negative interest rates, deflationary slump. Despite quantitative labour market continues to tighten, share buybacks by Japanese firms have easing (QE) and negative interest rates, even if it hasn’t yet produced the lasting surged to record levels. growth has been lacklustre and inflation rise in wages everyone is hoping for. is still just below zero, a far cry from the Unemployment is a mere 3.2% and could Meanwhile, the central bank and the Bank of Japan’s 2% target. well fall further. Meanwhile, for all the Government Pension Investment Fund fuss over negative interest rates crimping are also reliable buyers of the equity The gloom is overdone, however. For one bank profits and lending, Japan’s banks market. Throw in attractive valuations, thing, the Bank of Japan is expected to haven’t been this willing to extend says BMO Global Asset Management’s step up the pace of its QE programme credit since the early 1990s, as Capital Gary Potter, and “there’s hardly any way and to push interest rates even further Economics points out. to go but up”.

The ten most-hated shares on the FTSE

This is a list of the ten most despised Company What it does % of stock % on 27 May shares on the London market, judged by being shorted the percentage of stock being shorted. Short sellers hope to profit from falling Ocado Group Online supermarkets 23.13% 20.94% stock prices, so it can be useful to see Carillion Construction/outsourcing 18.34% 19.12% what they are betting against. The list is also a good indicator of stocks Wm Morrison Supermarkets 15.05% 14.67% with the potential to bounce strongly on unexpected good news – “short Mitie Group Facilities management 9.32% 9.06% squeezes” occur when short sellers are forced out of their positions, which can J Sainsbury Supermarkets 9.31% 8.53% send share prices surging. Supermarkets Ladbrokes Gambling 8.63% 7.14% remain under attack by discounters, with Ocado also in the spotlight owing to key Tullow Oil Oil and gas explorer 7.65% 7.41% client Wm Morrison’s joint venture with Amazon. Confidence in Just Eat appears Just Eat Online food delivery 7.02% NEW ENTRY to have been shaken by the CEO selling shares and the threat of competition Aggreko Power supply 6.94% 7.46% from UberEats. Hansteen Holdings Real estate investment trust 6.56% 6.22%

MoneyWeek 24 June 2016 moneyweek.com markets 7

Surprise exit for Impressive potential India’s bank chief in Nigeria Indian markets wobbled early this week when “I’m surprised it lasted as long as it did,” Raghuram Rajan, the John Ashbourne of Capital Economics told governor of the central The Wall Street Journal. The Nigerian bank, the Reserve Bank of government bowed to the inevitable last week India (RBI), unexpectedly and scrapped its currency peg of 197 naira to announced that he would the US dollar, which had been in place for over step down in September when his three-year a year. The naira, which had already reached ©iStockphotos term expires. a rate of 370 to the greenback on the black Bowing to the inevitable: the naira lost its dollar peg market, promptly slid by around 30%. “Nobody knows why,” says Economist.com. Perhaps Beset by dwindling oil revenue, the government Now the government has tacitly acknowledged Prime Minister Narendra feared a rise in inflation and hence interest that a weaker currency would encourage Modi is “placating the rates if it let the currency fall. That would domestic production more than import bans chauvinist arm of his temper growth and hurt companies with can, and will ultimately hurt consumers less. party… peeved by [Rajan’s] foreign-currency debt. But the side-effects of tendency to denounce keeping the currency artificially high proved Foreign investors should now return, not least intolerance”. His attempt worse. Foreign-exchange reserves, spent because the economy’s long-term potential to clean up bank balance defending the peg, have fallen to a decade low. is impressive, says William Railton in sheets may have irritated India’s “crony capitalists”, City AM. Two years ago it overtook while his refusal to The government tried to preserve them by South Africa as the continent’s largest lower interest rates banning imports, but this has created scarcity, economy, and while oil is its main export, it despite political pressure fuelling inflation – already around 15% – has been trying to diversify. Services comprise tamed inflation. and hampering industrial production and 50% of output and the growing middle class development. It has also forced people and bodes well for consumption. Infrastructure Investors should keep a firms into the black market. To make and corruption remain key weaknesses; the close eye on his successor. matters worse, foreign investors hold back World Bank estimates that $400bn in oil The next governor in these situations, assuming that the peg revenues has been stolen since independence in must resist political interference, says Una will have to be ditched at some stage, thus 1960. Devaluation is no miracle cure, but it is Galani on BreakingViews. depriving the country of valuable cash. certainly a step in the right direction. com – especially now that the RBI is setting up a new monetary M&A will bounce back after Brexit poll policy committee, three of whose six members The uncertainty over the UK’s future relationship with Europe has severely dented British merger will be appointed by the and acquisition (M&A) activity. The volume of deals involving UK targets has declined by almost government. It will also 70% this year compared with the same period in 2015, say James Fontanella-Khan and Arash be crucial to complete the banking reforms Massoudi in the Financial Times. The $57.6bn spent on deals so far this year account for just Rajan started. The new 4% of global M&A, a record-low British share. Global M&A is only 20% down on last year. governor “will struggle to “Nobody wants to do deals when they don’t know whether their target will be in or out of the match” Rajan’s authority. world’s largest single market,” according to one banker. Things could now improve either way, Meanwhile, India’s however: if we stay, relieved foreign firms should return, while a fall in sterling after Brexit could credibility “will suffer”. make our assets enticingly cheap.

Viewpoint Chart of the week: China snacks on peanuts “Catching up is hard to do… [progress] The Chinese “are just hoovering has slowed considerably... Since 2008, everything up”, according Peanut prices ($ per tonne) the proportion of [developing] countries to one trader. Demand for Argentina catching up with the US has fallen back peanuts has flared up in the China to 1990s levels. Between 2003 and 2008, Middle Kingdom as increasingly 2,200 emerging markets on average were health-conscious consumers growing at a rate that would have caught like to snack on them and chefs 2,000 turn to peanut oil for cooking. them up to 2015 levels of US GDP per China, once a key exporter, is 1,800 head in 40 years; by 2013-2015, that turning into a major importer, timescale had stretched to more than says Emiko Terazono in the 1,600 60 years… The reasons for the decline in Financial Times: imports are up the great convergence are complex and 50% in a decade. Chinese prices 1,400 varied. But the general prescription to are now higher than in the rest conduct policymaking on a predictable of the world, so it has been 1,200 basis that will reassure consumers, buying up supplies from big business leaders and investors holds exporters. The surge in demand 1,000 has coincided with poor 2014 2015 2016 across the emerging-market world.” harvests in India and Argentina,

the top exporter. Source: FT/Mintec Editorial, Financial Times moneyweek.com 24 June 2016 MoneyWeek investment strategy XX

8 investment strategy Should you short shares? Guru watch Jim Grant, the by Matthew Partridge editor of Grant’s Interest Rate Investing usually involves buying Observer, is a something you believe will go up in long-standing critic of the US value. However, you can also take Federal Reserve advantage of a fall in the price of a share, and central or any other asset, by “shorting” it. banks in general. This means selling a share that you He thinks that borrow but don’t own, with the intention those expecting of buying later on at a lower price and the Fed to hike interest rates this returning it to the owner. If you get year will be disappointed, he told it right, you make a profit from the CNBC earlier this year. The Federal difference in the price at which you sell Reserve has “missed its market” and the next move is more likely to be and the price at which you buy. a cut. Economic data suggest that the manufacturing sector is either Obviously, when you sell a share, you in recession or flirting with it. For have to hand it over to the new buyer example, the inventories of auto almost immediately. So when you short companies are building, suggesting a share, you’ll need to borrow it from that they have increasing trouble another shareholder until the point at selling the stock of cars that they have. which you decide to close the short by buying the share. You’ll normally be However, Grant thinks that even more loosening would not be enough to charged interest on this loan, based A “short squeeze” can be painful revitalise the economy. The “persistent on the value of the shares, at the price radical monetary experiment” of charged when they loaned them to you. the position (or be “stopped out”) by a ultra-low interest rates has led to the How much you need to pay depends on temporary surge in the price. In some Federal Reserve being put in charge how difficult it is to borrow the shares. cases, a large number of short-sellers can “of market manipulation”. This has This means that the longer you keep a be forced to close their positions, causing “been great at boosting real assets, short going, the more it costs you – so a further increase in the price as they are but not the real economy”. Although shorts are typically relatively short-term forced to buy back the shares. This is “things are clearly better than they trades rather than long-term positions. called a “short squeeze”, and can end up were in 2008, America has been going through “the slowest recovery in living being very expensive for the short-sellers memory”, with “young people unable Shorting is risky. If you buy shares then who don’t get out in time. to break into the world of work”. your gains are theoretically unlimited, Overall, the “horse of speculation” is and your losses are fixed at the value of The potential for a short squeeze means “ahead of the cart of enterprise”. your initial investment. With shorting that some investors look for shares that it’s the other way around since you could are heavily shorted and buy them. They Grant is bearish on asset prices, lose far more than the initial value of argue that this increases the chances of a likening the stock and bond markets your position if it increases enough in short squeeze. Contrarian investors also to a “little kitten stuck at the top of a value. If you short a share at £1 and it argue that high levels of shorting are a tree”, with Janet Yellen left looking on like a “helpless” firefighter saying, rises to £50, you’ve lost £49. However, sign of excessive pessimism. However, “how did you get up there little fur the most you could make is £1 (assuming some research has come to the opposite ball?” The combination of “sky-high the value of the share goes to zero). conclusion. A 2007 study by Eric Kelley asset markets and softening activity” and a 2008 study from Ferhat Akbas, suggests the world could be “entering Consequently, short-sellers will normally both from Texas A&M, found that the down portion of the credit cycle”. use a stop-loss that will automatically shares that are heavily shorted tend The outlook is very unclear, but“we close their position once a share reaches subsequently to lag the market in the will know more where we are in two a certain level. The downside of a stop- near term, suggesting that it’s best to years’ time”. loss is that you could be forced to exit avoid betting on them rebounding.

I wish I knew what a put option was but I’m too embarrassed to ask

A put option gives the holder the right (but not the obligation) to In addition to betting on a share or other asset falling in price, sell an asset, such as a share, for an agreed price on or before a options can also be used to protect (or “hedge”) against the certain date. When you buy a put option, you pay a fee (known risk of that happening. For example, you might buy a put option as a premium) to the seller of the option (who is sometimes on the FTSE 100 because you want to hedge your investments referred to as the “writer” of the option). You can use put against the risk of a bear market. If shares fall sharply, your put options to bet on the price of an asset falling while limiting your options should show a profit, helping to offset the fall in the potential loss to the initial premium that you pay. value of your other investments.

Let’s imagine that Acme Widgets is trading at 100p per share The price of an option is determined by a number of factors, and a put option to sell at 90p costs 5p. You buy a block of 1,000 including the volatility of the price of the underlying asset options at a cost of £50 (5p × 1,000). If the shares fall to 70p, you (options on more volatile assets will be more expensive). So would make a profit of £150 ((90p − 70p − 5p) × 1,000). However, option prices tend to rise during market turmoil. How long if the shares go up – to 120p, say – you let the option expire. an option has to run before it expires is also important, with In that case, you lose your premium of £50, but nothing more. options that expire further in the future being more expensive. ©iStockphotos; Press Association Press ©iStockphotos;

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Spread betting | CFDs | FX | Binaries Spread betting and CFD trading can result in losses that exceed your deposits. Volatility can increase risk. *Best Trading Platform Features among spread bettors and FX traders in the Investment Trends 2015 UK Leveraged Trading Report. 10 shares City Diary Why Muslims love Vimto Goldman Sachs is being sued for $1.2bn by Libya’s sovereign wealth fund, Nichols, the Merseyside-based maker of purple fizzy drinks, which has accused the bank of warping the judgement has an unexpected fan club in the Middle East of its investment officials by plying them with women. There aren’t that many ways for investors All this translates into a boost A former banker at sitting inside the M25 to make for Nichols around June, Goldman Sachs allegedly money out of Ramadan, but when Ramadan usually falls. employed two prostitutes in buying shares in Nichols The group’s sales in Africa Dubai, including “Michella”, is definitely one of them. and the Middle East have 25, from Russia, in a bid to The Merseyside-based firm more than tripled in the last clinch lucrative trades with is best known for making ten years to over £20m. the country under former dictator Colonel Gaddafi, Vimto, a purple fizzy drink, However, it would be according to claims most popular among teenagers misleading to assume that the presented to the High Court and grannies in the north of majority of Nichols’ business in London. Goldman Sachs England. But Vimto also has hinges on the Muslim diet. disputes the allegations and an ardent following across the Revenue in the UK has been the case is ongoing. Middle East, where it is sold in flat for four years, but still a double-strength concentrate, accounts for the majority of The Libyan fund, which making it an energy-boosting its business, with sales of says that it made huge drink to break the fast during £85m last year. losses on nine trades executed between January Islam’s holy month. and April 2008 while The firm, in which the Goldman made $270m Nichols has played to its following, Nichols family still has a in profits, is accusing the using a string of provocative 9% stake, is a “financial fortress”, says bank of exploiting the advertisements on Saudi television to link Richard Beddard in Money Observer. It has financial naivety of its Vimto to Ramadan, just as mince pies are £35m in cash and has not carried any debt investment officials – and associated with Christmas in the UK. In one for the last decade. But its concentration of it is presenting as much advertisement in 2007, the world is thrown sales in the UK leaves the company heavily embarrassing evidence as it into panic at the prospect of Vimto running exposed to the so-called “fat tax” levied on can in support of that claim. out. A bottle is snatched from a man on his sugary drinks by Chancellor George Osborne deathbed, while a woman has a dream that in March. The company’s shares fell more her stash of Vimto is missing and attacks her than 10% on the news, far more than its larger husband with a cricket bat. rivals, such as Pepsi and Coca-Cola, which earn a fraction of their sales in Britain. That Vimto should cater to a religious crowd is not as bizarre as all that, says The Times. Nichols has bounced back, but is still The purple fruity beverage was originally marginally cheaper than competitors, on concocted by John Noel Nichols at his shop in 22 times forward earnings, versus 23 times for Coca-Cola. Nichols’ acquisitions of Any dealmaker could Timperley, Cheshire, to “appeal to the alcohol “rape” Libya’s sovereign abstainers of the temperance movement”. other soft drinks brands, including Panda, wealth fund, said one It has been sold in Muslim countries for nearly have however fallen flat. Nichols is a sugary internal memo sent by a a century and had a head start in the Arab play on the Middle East, but its discount to Goldman Sachs staffer. world, which had a boycott on Coca-Cola its larger rivals is not yet wide enough to “You just delivered a pitch until 1991. make it tempting. on structured leveraged loans to someone who lives in the middle of the desert with his camels.” Bids & deals: big potential in diamonds Youssef Kabbaj, the former executive at Goldman, was A huge uncut diamond the it from being crushed. The estimate of $70m (£48m), but meanwhile instructed by size of a cricket ball is set to only diamond ever mined the stone could fetch more his bosses at the bank to be auctioned by Sotheby’s that was bigger, which was than $85m, according to “teach”, “train” and “dine” in London next week, with found in South Africa in 1905, Panmure Gordon, making it Libya’s junior officials, bidding expected to push was broken apart after being “an expensive paperweight.” according to one email. through £50m. The massive presented to Edward VII, to be Lucara’s shares have rocketed Youssef’s text messages diamond, which weighs set into the Crown Jewels. since the discovery, adding to Michella have also been 1,109-carats, is the biggest C$880m ($687m) to its market presented as evidence. “Hi darling, do you remeber ever to go under the hammer. Commodity prices have cap, while London-based [sic] me? Youssef from It was unearthed in Botswana struggled for five years, but Firestone Diamonds has also London. Just arrived in last year by a Canadian the diamond market has risen strongly, as the market Dubai.” After a protracted mining company, Lucara, remained strong. In May, wakes up to the potential for back and forth on price, which is backed by Swedish Christie’s sold a 15-carat big diamonds at its Letseng he said she had “a deal”. billionaire Lukas Lundin. A blue diamond for $58m, the mine in Lesotho, which will Michella, who earned an 27-year-old geology graduate, most expensive diamond enter production later this estimated £500,000 a year, Tiroyaone Mathaba, plucked ever auctioned. Lucara’s find year. Firestone has also been has since moved to Italy, the rock out of Lucara’s is likely to beat the record. tipped as a target for Lucara, according to The Sun. processing plant, stopping Sotheby’s has set a pre-sale which is prowling for deals. ©Alamy; iStockphotos

MoneyWeek 24 June 2016 moneyweek.com shares 11

MoneyWeek’s comprehensive guide to the week’s share tips Directors’ dealings

Three to buy Simon Silver, a co-founder of upmarket Conviviality office developer Derwent London, has Investors Chronicle sold 30,000 shares in the company, pocketing just under £1m. Silver, who Shares in the company behind the off-licence chain Bargain Booze have big potential. set up the business more than 30 years After buying up several rivals, including wine distributor Bibendum, Conviviality ago, retains 213,617 shares, worth could grow into a major alcohol wholesaler, supplying both the on- and off-trade around £7m (0.192% of the company). sectors. The forecast dividend yield looks attractive at 4.3%. 196p Shares in Derwent, which has more Halma than six million square feet of high-end The Times office space in central London, have Halma, the Buckinghamshire-based technology firm that specialises in bounced around this year along with hazard detectors, from fire alarms to pregnancy scanners, has raised its other companies in the commercial property sector, as EU referendum dividend by at least 5% for 37 years. It is deal-hungry, spending more polls have swung from side to side. than £200m on acquisitions last year, swallowing a US digital firm. Derwent’s property portfolio in Organic growth on top was 6% last year. The shares are far from cheap London is valued at £5bn, leaving on 25 times earnings, but deserve the premium. 933p it heavily exposed to the capital’s commercial property market. Some Pets at Home analysts expect London property to Shares suffer if the UK votes to leave the EU. “Snap up” shares in the pet accessory firm, says Shares. Pets at Home is now also the biggest small-animal veterinary firm in the UK, offering “resilient growth” in a fragmented market. It has raised its dividend pay-out policy and also plans to return excess cash as special dividends. 235p A German view

Infineon Technologies is Europe’s Three to sell biggest semiconductor maker, and Berkeley Group Circassia Pharmaceuticals Servelec appears to have its fingers in all the The Daily Telegraph The Sunday Times Investors Chronicle right pies. It already makes half its Berkeley, the luxury The allergy-treatment Dwindling NHS budgets sales – set to hit €6.5bn this year – in the fast-growing Asian market, London flat builder, has developer listed on the have delayed orders where its Chinese business looks reported record results stock exchange at a price at software specialist especially promising. The advent of and has pledged to return of 310p two years ago, Servelec and its shares electric vehicles is a major opportunity, £2m a year to investors in one of the market’s have “tanked”. Orders notes Wirtschaftswoche, as electric in dividends over the next biggest public floats. anticipated for its and hybrid cars contain chips worth five years. But “cracks” But progress at the technology division, which around $700 a car. Beijing aims are appearing. The company has been slow are linked to regulatory to increase the number of electric property cycle looks like it and too much of its value changes in the water vehicles in China by 700,000 this year. has reached its peak rides on results due from sector, have also failed to Infineon’s chips are also required for the photovoltaic cells that capture and average prices in trials of its cat-allergy materialise. The number solar energy, and are central to the London are now falling. drug. Disappointment of acquisitions made by emergence of the “internet of things”, The forward price- could herald a major management only adds to whereby everyday objects such as cars earnings ratio is just eight, sell-off in the shares, if not concerns. It’s now time and appliances are being automated but that assumes a big the biotech sector more to bail out of the shares. and connected. jump in earnings. 2,954p broadly. 270p 227p

And the rest Vital numbers

Buys Price at % change Ashtead Group Shares in the tool-hire firm are cheap and it plans share buybacks (Times) 986p 21 Jun since 14 Jun BCA Marketplace Europe’s car auctioneer is generating surplus cash (Investors Chronicle) 177p FTSE 100 6,225 5.1% Belvoir Lettings The UK’s biggest franchise letting agency is resilient and yields 6% (Mail) 122p Nikkei 16,066 1.3% Consort Medical The shares in this maker of drug delivery devices look cheap (Times) 941p S&P 500 2,089 0.7% FirstGroup The rail and bus firm is on track despite losing two franchises (Inv. Chr.) 114p Nasdaq 4,844 0.1% GB Group The security firm’s shares are worth holding despite the CEO leaving (Shares) 285p CAC 40 4,380 6.1% PureCircle The market for natural sweeteners is growing strongly (Inv. Chr.) 343p Dax 10,060 5.7% Safestore Occupancy is low at the self-storage firm, giving it room to grow (Times) 350p $ per € 1.13 0.6% Sierra Rutile Rutile prices are stabilising and the firm’s output is ramping up (Inv. Chr.) 22p € per £ 1.30 3.2% SQS Two US acquisitions have bolstered the software firm’s position (Shares) 442p $ per £ 1.47 4.1% UBM The exhibitions specialist is paying a juicy special dividend (Times) 560p Gold ($ per oz) 1,267 -1.4% Wincanton The logistics provider could be a takeover target (Telegraph) 187p Brent crude oil 51 2.5%

moneyweek.com 24 June 2016 MONEYWEEK city view XX

12 city view Stop this corporate bullying is clear enough. The language belongs to everyone and, within reason, should be available to every firm, big or small. No one invented it, and it is impossible to see any legitimate argument for anyone laying claim to any particular word. Of course, unique brands Matthew Lynn should be protected. I can’t set up a grocery store called Tesco, or sell TVs under the Samsung name, or set up a Next time you want to thank the person coffee bar called Starbucks. But everyday at the checkout who packed your bags, words shouldn’t be controlled by anyone. or someone who steps out of your way If an entrepreneur wants to use a word in the street, check with a lawyer first. for a new business, and is not pretending Why? Because US bank Citigroup thinks to be part of an existing corporation, it owns the word. Seriously. The bank is then it is unreasonable to prevent them. suing phone company AT&T, arguing that its use of the word “thanks” in its Intellectual property law is now being “AT&T thanks” loyalty scheme infringes used as a way to entrench the Citi’s own trademarked “Citi ThankYou” dominance of big corporations, and scheme. The outcome remains to be to keep new ideas out of the market.

seen. With any luck, the judge will give Only huge firms can afford the legal ©Getty Images the whole Citi board ten years in jail departments and risk the court cases Häagen-Dazs: a pioneer in fakery for wasting his or her time. But it is an needed to enforce such restrictions. You illustration of just how aggressive big might be tempted to describe it as a companies have become in trying to monster growing out of control – were it “Intellectual property law has claim ownership of everyday words. not for the fact that the Monster Cable gone bonkers and is now a firm in the US is especially vigilant “Pods” have been around for a long time in enforcing its rights over the word barrier to business” – especially in the vegetable world – but “monster”. And we will probably see after the success of the iPod, Apple tried much more of this. Brand names, patents car makers, restaurants, or any other sort to stop anyone else from using the word. and logos are becoming more and more of business. The more entrepreneurs we BP once tried to sue anyone who used the important to firms. In an increasingly have trying out new things, the better off colour green. Best of all, Häagen-Dazs competitive global economy, new ideas we will all be, even if the people they are tried to act against anyone using a made- don’t stay new for long and successful challenging don’t like the competition. up Scandinavian brand, on the grounds products are rapidly imitated. Thickets of rules are often used to keep that its own was fake, and that it was small companies down. Many come the first firm to come up with the idea of Companies will try to stop that from the government. But bullying pretending to be northern European in happening. But that doesn’t mean big corporations, with aggressive legal order to sell stuff. we should let them. It’s a form of teams, can do exactly the same thing, bullying – and like any bullying, it and deserve even less sympathy – because This is bonkers. And it is a sign that needs to be resisted. Far better if phone they should know better than anyone intellectual property law is becoming a manufacturers are influenced by each that the freedom to compete is what barrier to business. The basic argument other’s innovations. The same goes for makes capitalism work.

Who’s getting what Nice work if you can get it At a time when the armed forces face ■ Despite suffering an embarrassing high-profile hack that exposed the personal a pay freeze, the Ministry of Defence data of TalkTalk’s four million customers, the total pay of boss Dido Harding nearly (MOD) hired headhunters to scout tripled last year to £2.8m. Baroness Harding said she would give her £220,000 bonus out applicants for the new role of to the charity Ambitious About Autism. TalkTalk’s pre-tax profits fell by 50% in 2015. Director General, Nuclear, The Sun on Sunday reports. The successful ■ David Brown may head the rail franchise rated the least reliable in Britain – applicant will earn up to £400,000 a Govia Thameslink Railway in London – but that hasn’t stopped the Go-Ahead chief year for overseeing the paperwork executive from pocketing £2.16m last year, up from £1.96m in 2014. Dividends to for renewing Britain’s Trident nuclear shareholders rose by £2m to £37m in the same period. deterrent, comprising a £300,000 basic salary (more than double the prime ■ SABMiller boss Alan Clark saw his total pay fall last year due to the impact of minister’s), plus a potential 30% bonus. currency moves on his long-term incentive scheme, which fell in value from £4.4m Perks include a chauffeur-driven car, in 2015 to £2.4m. However, Clark’s fixed pay rose to £1.7m from £1.5m, while his first-class travel and “top hotels” for bonus grew 56% to £1.7m. Clark is also in line for a £55m pay out from the sale of the official business. Six applicants have brewer to rival Anheuser-Busch InBev. been shortlisted. “This role involves running a specialised, multi-billion- ■ FirstGroup’s CEO, Tim O’Toole, saw his bonus fall to £162,000 from £578,000 last pound programme on a salary which year, as the transport group’s operating profits fell. His total pay fell to £1.24m from compares with the standard market £1.65m. The remuneration committee has since rejigged how his bonus is calculated. rate,” an MOD spokesperson said.

MONEYWEEK 24 June 2016 moneyweek.com TO KNOW LOCAL COMPANIES, KEEP LOCAL COMPANY. LET’S TALK HOW.

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MSCI China 0.3% 9.4% -10.1% 29.0% -17.6%

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14 briefing Cleaning up our toxic air The air we breathe is killing us – and costing us a fortune too. But if you think electric cars are the answer, think again, says Simon Wilson Is there a problem? coal-driven power stations (the global Air pollution in Europe costs more than proportion is 41%, according to the £1.5trn a year – roughly equivalent to a World Coal Association), it is to some tenth of the continent’s GDP, according extent true that, as the green venture to a 2015 study by the World Health capitalist Vinod Khosla has noted, Organisation. The study, covering EU “electric cars are coal-powered”. Also, and non-EU states, is the first attempt while electric cars emit less carbon of its kind to calculate the monetary dioxide, the production of their batteries costs of polluted air. These costs come in creates vast quantities of the greenhouse the form of 600,000 premature deaths gas, meaning that over an electric car’s a year, as well as non-fatal illnesses. lifetime the advantage is marginal. That’s Overall, the study found that pollution before you get into particulate matter. is a factor in the deaths or illnesses of at least one in four Europeans; What’s that? that air pollution is the single biggest Particulate (or “PM”) pollution is made environmental health risk; and that in up of tiny particles created by brake and 2012 outdoor pollution, such as that tyre wear, and the road surface itself, from diesel car exhausts, accounted for and is produced by all cars. But because 482,000 premature deaths Europe-wide. eco-vehicles are heavier (typically 24% heavier, due to the batteries and other How much of this is due to transport? extra parts), their non-exhaust emissions It depends on the type of pollution, are far larger. Research published in the but overall, road transport is the journal Atmospheric Environment found biggest single source of air pollution that eco-friendly cars produce far more in cities. According to the World Atlas non-exhaust “PM” pollution than the of Atmospheric Pollution (from 2011), ©Rex Features diesels and petrol engines they are slated road transport accounts for 88% of Making them run on coal won’t help to replace. That’s significant because, the carbon monoxide in London’s says the study’s co-author Peter Achten, atmosphere, 62% of particulate matter, emissions of NOx and particulates. non-exhaust particulate emissions and 53% of nitrogen dioxides (NOx). According to data cited by The Sunday account for more pollution than exhaust London, like Milan and Stockholm, Times, at least 7,000 deaths a year can be emissions do, in all modern cars they has tried to tackle this via congestion linked to diesel pollution. Many expect surveyed. Moreover, these kinds of charging and a low-emissions zone, the VW emissions scandals (and others) emissions are “more toxic than emissions and from 2020 an “ultra-low-emissions to push drivers away from the fuel. from modern engines so they are likely to zone” will be created, meaning all be key factors in the extra heart attacks, pre-2007 motorcycles, pre-2006 petrol Are electric cars the answer? strokes and asthma attacks seen when air cars and pre-2015 diesel cars will pay At the point of use, in terms of NOx pollution levels surge”. an extra £12.50 on top of the existing and hydrocarbon emissions, all-electric £11.50 a day rate. In Paris, meanwhile, cars (such as the Nissan Leaf and the What does the future hold? new rules that come into effect next forthcoming Tesla Model 3) and plug-in The car industry has to make eco- Friday (1 July) will ban pre-1997 cars hybrid vehicles (like the Toyota Prius) friendly cars much lighter. The lithium- and pre-1999 motorbikes from the are obviously less polluting. But, sceptics ion battery is the dominant electric-car streets on weekdays, in effect removing say, you can’t just consider the car – technology, but it’s so chunky the car about 5% of polluting elements linked you have to consider how its electricity base needs to be built around it. It’s also to cancers, heart disease and respiratory is produced. Given that a significant flammable, adding to the complexity of problems such as asthma. proportion of electricity is produced by integrating them into the design. A key challenge for policymakers is Has diesel made it worse? to focus not just on engines The UK has had a stop-start but on pollution overall. Either attitude to diesel. When he was How to build a better battery way, most analysts expect sales chancellor in the early 2000s, of hybrids, in the first instance, Gordon Brown overhauled Alternatives to the existing lithium-ion model are “jostling to rocket once the typical on the starting line”, says Peter Campbell in the Financial vehicle excise duty so that Times. Lithium-air batteries are considerably behind electric-only range exceeds 50 diesel cars, which are about lithium-ion batteries in development, but have a higher miles and prices fall to those 20% more efficient and emit energy density and don’t catch fire. Solid state batteries of a similarly specified diesel less carbon dioxide (but up to (the “holy grail” of battery technology) can be much or petrol model. In ten years’ twice as much NOx), cost less smaller than liquid-based batteries, making them much time it’s entirely possible that in tax than those with petrol easier to integrate into existing car designs. Dyson is breakthroughs in technology engines. Brown also cut duty reportedly working on its own electric car on this basis. (see box) will mean that – after on low-sulphur diesel and Toyota, meanwhile, a pioneer of hybrids, has already a century of cars driven by reduced company-car taxes. launched its first hydrogen-powered car (the Mirai). Rather pollution-heavy combustion than using a battery, hydrogen mixes with oxygen to create This all boosted diesel sales, a fuel cell that runs the electric motor. engines – we’ll be driving encouraging 11 million cars on very different machines and the roads – but also boosted breathing more easily.

MoneyWeek 24 June 2016 moneyweek.com

best of the financial columnists XX

16 best of the financial columnists

Money talk Perverse Why has Satya Nadella, CEO of Microsoft, just splashed out more than $26bn on LinkedIn, an unprofitable professional networking site? incentives at asks Jonathan Ford. There may be some synergies, but it’s hard to see how it can provide additional revenue, nor how it can fail to detract Microsoft from the need to nurture Microsoft’s still hugely profitable software franchise. If he knows all this, there must be a “powerful” opposing force at stake. And there is, in the form of “lavish equity incentives”. Jonathan Ford Nadella may end up with a stake of between 1.3 million and four million shares over the next five years, but he really hits the “jackpot” Financial Times (stock worth more than $200m) if Microsoft’s shareholder returns exceed certain stockmarket-based targets between now and 2021. Such incentives strongly motivate him to find some short-term investment story, such as high-profile acquisitions, that will encourage investors to put a high price on Microsoft’s shares. Investors need to “think harder about the messages” that incentive packages send. ©Rex Features

“Not only is everything It makes Millennials are the first generation who will reach the age of 90 in ridiculous in Hollywood large numbers, says Laura Carstensen. The Sightlines Project at the but it’s cut-throat, too. sense to live Stanford Centre on Longevity found that millennials smoke less, The only way you can exercise more, have stronger friendships and more college degrees. survive in this town is if you find the funny side.” with Mom On the downside, they are also poorer, with higher debts, few Singer Kelly Osbourne savings, and worse job and housing prospects. Nonetheless, though (pictured), in The Times disparaged, millenial lifestyle habits “could be the right approach”. Laura Carstensen Many millennials still live with their parents and are less likely to be “[My success] was sucked out of me by my own fault. married or have children than previous generations at their age. Living If I’d worked harder and Time with parents for longer helps with repaying debt and saving for houses been cleverer… I was still a and retirement. Buying a house at 35 and paying off the mortgage at child at 45.” 65, with 30 years ahead of you, is a “bright prospect”. But it takes Actor Rupert Everett, in planning, which isn’t in our nature. By 2050, an estimated eight The Sunday Times

million people will be in their 90s. But US policymakers have barely “To be honest with you, thought about what that might mean. (See also page 39.) I don’t know. Someone suggested it.” Sir Philip Green on why he opted to live in Monaco, Our colossal Last year Tesco produced a 59,400-tonne food-waste mountain, says quoted in the FT Joanna Blythman. That’s 119 million meals, up 4% on last year. food-waste Supermarkets themselves are the problem. They started colonising the “How do we know grocery market in the 1980s and are “retail dinosaurs locked into a economists have a sense system that’s riddled with problems”. Our bins only started to fill up of humour? They put a mountain decimal point on their when, instead of shopping a little every day, we started doing a weekly forecasts.” shop. Now we hazard a guess as to what we are likely to eat and chuck Old joke, quoted on Joanna Blythman food out, usually needlessly, once it passes its best before date or when Economist.com the next shop arrives, egged on by profit-hungry retailers. “Battalions” “To be on Broadway you The Observer of quangos, government agencies and charities see supermarkets as have to work hard and allies in the war on food waste, but the supermarket system that is study for years. Or you can “predicated on super-sized stores” and overconsumption, “actively do what I did: already be begets” it. The business model “isn’t fit to meet 21st-century food famous.” challenges”. We must instead “learn from the burgeoning grassroots Comedian Steve Martin, in The Sunday Times initiatives that aim to relocalise and scale down our food chain”. “I know I’m not that clever. I’m not thick — I The NHS became a battleground in the EU referendum, says got an F in English, but The NHS I’m very successful, and I Alice Thomson. Brexiteers said immigrants are wasting NHS enjoy my job. I’ve always can’t go on resources; the Remain camp that the service relies on migrant workers. tried really hard in all my But both sides missed the real point. The key issue is that the NHS jobs. I worked down the like this is trying to do “too much with too little money”. There are a million fish market, I worked as more patients in A&E than in 2010; hospitals perform a million a trader three different times in three stock- more operations and GPs conduct 2.1 million more consultations. Alice Thomson broking firms, I worked Staff shortages, caused partly by female part-timers and early at a salmon factory, I’ve retirements, led to a £3.6bn bill for agency and contract staff last year. worked in a warehouse, The Times The public aren’t helping. Smokers cost the NHS £2.7bn last year, and now I’m on TV and I’m really happy.” the obese £9bn. And despite efficiency gains, we will be spending just Reality TV star Joey Essex, 7% of GDP on the NHS by 2020. The US spends 18%. The fact is, quoted in living longer costs money and, in or out of the EU, we will just have to The Sunday Times consider European-style social insurance or a dedicated NHS tax.

MoneyWeek 24 June 2016 moneyweek.com MW Full Page Ad VARIANT 1 FinalV2.pdf 1 14/06/2016 16:52 opinion XX

18 opinion Why I voted for Brexit believe so. At university, I read 18th- century European history. The ideals of the Enlightenment – a preference for reason over tradition, for economic individualism over state control, for toleration over bigotry, and a belief that relationships between nations should Edward Chancellor be governed by the rule of law – remain close to my heart. The same notions guided the founding fathers of the By the time you read this, we’ll know postwar European project. whether Britain has voted to remain in the European Union (EU) or not. Here’s Over the course of its evolution, the why, with a certain trepidation, I voted EU has betrayed those ideals. In 1795, for Brexit. My unease derived not from a Immanuel Kant, who coined the fear that change would unleash economic term “Enlightenment” (in German, turmoil. Rather, I worried that this vote Aufklärung), wrote Perpetual Peace: A conflicted with my own cosmopolitan Philosophical Sketch. In this essay, Kant leanings. On reflection, I decided that by showed profound respect for a state’s rejecting the EU I showed greater fellow separate identity: a state “like the stem of feeling for the citizens of Europe and was a tree has its own root… to incorporate it

more faithful to the continent’s highest as a graft on another state, is to destroy ©pic credit ideals, than those who wish to remain. its existence as a moral person”. The I’m with Kant – and therefore against the EU consequence of bundling states together, Dealing with the economics first, leaving even when done peacefully through The European project has morphed the single market would certainly dynastic alliances, would be that the from Kant’s international federation into create uncertainty. But developed “subjects of the state are used and abused something akin to the late Habsburg economies have withstood far greater as things that may be managed at will”. empire, a fractious conglomeration of shocks. US growth, for instance, was nations riven by centripetal forces. The only temporarily set back by the Great Kant preferred republican government – EU’s form of government, in Kantian Depression. It’s inconceivable that a one which gained the “consent of citizens terms, can be described as “despotic” far less extreme event such as Brexit as members of the state” – to despotism, since the public’s consent has not could by itself permanently damage characterised by “the irresponsible been gained. During the euro crisis, Britain’s prospects. In reality, the greatest executive administration of the state by unemployment in parts of Europe has economic risk comes from the threat of laws laid down and enacted by the same exceeded Great Depression levels. retaliation by our erstwhile European power that administers them”. Kant did partners. Given that Britain runs a large propose an international federation of If the EU cared for its citizens, or was trade deficit with Europe, a trade war states to avoid war, but this “would not properly accountable, substantive would be irrational. It reflects poorly on have to take the form of a State made reforms would have been enacted. This the EU that the threat should be credible. up of these nations”. Such a super-state hasn’t happened. As a result, discontent would not allow the existence of a free across Europe is fostering political But doesn’t a vote for Brexit reveal a state, which by definition both made and extremism of the 1930s variety. My petty nationalism, at odds with modern applied its own laws. “Each state places vote for Brexit shows solidarity with progressive values? Or, as the daughter its majesty (for it is absurd to speak the European public and complies with of a friend put it: with my vote, I was of the majesty of the people) in being the principles of Kant, the greatest of putting myself in bad company. I don’t subject to no external juridical restraint.” Enlightenment philosophers.

Robot watch Auctions Going… A series of letters written The next time anyone in the north London borough of Enfield by Breakfast at Tiffany’s star Audrey wants to find out why their rubbish has not been collected Hepburn, which chart her early rise to or how to make a planning application, they will have a new fame and marriage to actor Mel Ferrer, council employee to get annoyed with, says Valentine Low in The are expected to fetch up to £4,000 Times. Her name is Amelia and she’s a smiling young blonde, when they go under the hammer blue-eyed council worker. But she’s not all she seems. on 29 June as part of Bonhams Entertainment Memorabilia in London. That’s because Amelia is what’s known as a “cognitive agent”. She is an artificial-intelligence program Gone… The pink dress made by designed by New York tech firm IPsoft. Amelia is French designer Pierre Balmain and supposed to be able to respond to questions as a stripped off by Sophia Loren to reveal human would, as well as learn on the job. She is her racy black corset in a famous “capable of analysing natural language, she scene with Peter Sellers from the 1960 understands context, applies logic, learns” comedy The Millionairess sold for £500 and “resolves problems”, says IPsoft. She is at Duke’s auctioneers in Dorset. It was even able to “sense emotions”, adapting her part of a collection of garments given response to the tone of the caller. to a member of the crew after filming.

MONEYWEEK 24 June 2016 moneyweek.com funds XX

funds 19 Should I buy discounted trusts? by Sarah Moore they have growing doubts about the manager’s ability. Investors may also We’re keen on investment trusts at be sceptical as to whether the NAV is MoneyWeek. One reason for this is that accurate – some investment trusts have they can often allow you to buy assets at holdings in unlisted companies, where less than their true value. That’s because valuations aren’t always up to date. shares in an investment trust are traded on the stockmarket – unlike other types If an investment trust is trading at a of fund, such as unit trusts and open- premium to NAV, it’s sometimes evidence ended investment companies – and their that investors are overexcited about a price is driven by market demand. If sector and that the trust is overpriced. more people want to buy, the price rises; However, a more modest premium if they don’t, the price falls. So the trust’s can be a sign that investors see it as an shares can be undervalued or overvalued exceptionally well-run fund. You’re compared to its net asset value (NAV) – paying more than the assets are currently

the total value of its holdings. worth, but you think the manager’s ©iStockphotos decisions will add enough value in future A premium might just indicate overexcitement Looking at the difference between the that you are willing to pay up for access trust’s share price and its NAV – and to their skill. at the sector average for similar funds, understanding why it trades at a discount to see how the trust stacks up next to or premium – is important when deciding So when choosing an investment trust, its peers: trusts in different sectors often whether to invest. That’s because even you shouldn’t look at the size of the trade at different discounts. when a trust is trading at a big discount current discount or premium in isolation. to NAV, you’re not necessarily getting a You should compare it to the trust’s The sector’s trade body, the Association good deal, while a trust that trades at a average over 12 months and ideally over of Investment Companies (TheAIC. premium isn’t always a terrible deal. a much longer period. If the current co.uk), is a good source of information discount is larger than average (or the on individual investment trusts. There are several reasons that a trust premium is smaller), it could be a good And MoneyWeek’s editor-in-chief, may trade at a discount. It could be that time to buy in. However, do research the Merryn Somerset Webb, has put together investors are concerned and have started trust carefully to check that there isn’t a a portfolio of six of our favourite selling their shares in the trust, perhaps compelling reason why the discount has investment trusts, which can be found at because they believe a particular sector widened – perhaps the manager has made MoneyWeek.com/funds/the-moneyweek- will soon go out of fashion, or because serious mistakes, for example. Also look portfolio-of-investment-trusts.

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20 politics & economics In or Out, the world has changed Whatever the outcome of the EU referendum, the increasingly rancorous campaigning, Betting on politics which was brought to a shocked halt with the by Matthew Partridge murder of Labour MP Jo Cox last week, will have far-reaching repercussions. This was not By Friday morning, long Prime Minister David Cameron’s intention. He after MoneyWeek went promised the referendum in 2013 to “puncture growing support” for the anti-EU Ukip and to press, the European “placate” his own party’s eurosceptics, says referendum will have been the Daily Mail. He hoped it would settle the decided. We’ll have a whole European question, not unleash a bitter feud. host of markets to discuss, from possible leadership In 1975, Harold Wilson held a referendum elections in both parties on EEC membership as a way of “smoothing to the date (and result) of over” internal party divisions, says Geoffrey a new general election. Wheatcroft in The Guardian. It worked – So it’s a good time to take the majority of Britons voted to stay. But stock of the different ways “Cameron unleashed forces of which he had not been properly aware” – from resentment bookmakers and betting of “elites”, to “crude racism” to “humble exchanges calculate odds. patriotism”. The future of the Conservative ©Press Association ©Press party is now at stake, says Andrew Grice in ©pic credit In the past bookies would The Independent. Cameron has vowed to stay, Can they stay chums? express odds as the net even if Leave wins, and 70 MPs, including amount you could expect to Boris Johnson and Michael Gove, have signed Jeremy Corbyn says that Labour is “very win. So odds of 3/1 would a letter backing him. But privately, senior ready” for a post-referendum snap general mean you get £3 extra for Tories say his position “would be untenable”. election. But he has his work cut out too. every £1 you bet, for a total His pro-Remain campaign was “lacklustre” of £4 back. To work out the Yet his position will be tough even if (he voted Out in 1975); a “potentially Remain wins. Tory Brexiteers are livid that damaging schism over immigration” is in implied probability of an Cameron used the government to “churn the offing; and Labour faces an “almighty event happening, divide the out pro-Remain propaganda” and may not row” over Trident, says Charlie Cooper in right hand side by the two feel forgiving. Given the government’s tiny The Independent. More generally, the sides added together. In this majority of 12, pro-Brexit Tories could “wage political kaleidoscope has been shaken, says case 3/1 gives an implied guerrilla warfare” reminiscent of the “chaos” Asa Bennett in The Daily Telegraph. This probability of 1/(3+1) = 0.25, after John Major signed the Maastricht Treaty. debate has “thrown together politicians from or 25%. However, some MPs and ministers from both camps are wildly different political traditions... and seen bookies and exchanges talking of installing Home Secretary Theresa many of them shift their rhetoric on the big have switched to digital May as a “caretaker leader” – only she has the issues”. We have fallen down the rabbit hole, odds. These indicate the ability to unite the “warring factions”, say Tim into a new political world. “How long will we Shipman and James Lyons in The Times. stay there?” total you will get back. So a 3/1 bet would be quoted as 4.00. Digital odds are always quoted as a single What the papers backed figure, usually to two decimal places. To work Leave Remain out implied probabilities, The Daily Telegraph: “The EU now has the Financial Times: “Since Britain joined the EU simply divide 1 by the trappings of the nation state that we were in 1973, real gross domestic product per head figure so 4.00 = 0.25 or 25%. always assured it would not become: a has grown faster than in France, Germany and single currency; a central bank; no frontiers... Italy... membership of the single market has Recently some firms have Nor will it stop there.” been a magnet for foreign direct investment, funding a bulging current-account deficit and been quoting binary bets. The Sun: “The Remain campaign… predicts guaranteeing British jobs.” The best way to think of mass unemployment, soaring interest rates these is as a bet that is and inflation, plummeting house prices… The Guardian: “A better world means working worth 100 if the event Nonsense! Years ago the same politicians and across borders, not sheltering behind them.” happens, and 0 if it doesn’t. economists issued apocalyptic predictions As a result, the price should about our fate if we didn’t join the euro.” The Times: “If Mr Cameron wins, he must reflect the implied chance seize the moment... for a new assault of an event happening in Daily Mail: “There is nothing petty-minded on waste, red tape and anti-democratic percentage terms, so a about being proud of our traditions and interference… He could go down in history as price of 25 would be a 25% history... Indeed, it is a sclerotic EU, with its both an effective campaigner and the leader terror of competing with the great economies of a reform movement in Europe that would probability. To convert of the world... which is backward-looking and prevent it sliding into a disharmonious federal back to digital odds, simply locked into the past.” state that would ultimately rip it apart.” divide by a hundred and invert the result.

MoneyWeek 24 June 2016 moneyweek.com Book your seat for the 2016 MoneyWeek Conference today

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Your capital is at risk. The conference is organised by MoneyWeek Research Ltd. Some speakers edit newsletters for MoneyWeek Research Ltd and Fleet Street Publications Ltd, and may provide investment advice as defi ned by FSMA 2000. Other speakers present on behalf of MoneyWeek magazine, an unregulated product published by MoneyWeek Ltd. MoneyWeek Research Ltd (FCA No 706697) and Fleet Street Publications Ltd (FCA No 115234) are authorised and regulated by the Financial Conduct Authority. https://register.fca.org.uk/. Registered offi ce: 8th Floor, Friars Bridge Court, 41-45 Blackfriars Road, London SE1 8NZ. Customer Services: 020 7633 3780. MoneyWeek Research Ltd is registered in England and Wales No 9539630. VAT No GB629 7287 94. MoneyWeek Ltd is registered in England and Wales No 4016750. VAT No GB629 7287 94. personal finance XX

22 personal finance Can cash really trump shares? by Natalie Stanton in 1998, if you saved £10,000 into the UK’s best-buy one-year deposit account, Most advisers would agree that, over the you could have walked away a year later long term, shares are the best place for with £10,800. Today, if you save £10,000 your money. And in the short term you’re into the best-buy one-year savings bond, best to stick with cash. However, is this you’ll pocket just £10,166 a year on. long-held wisdom necessarily true? Tracker funds are also a lot cheaper than In this week’s Financial Times, consumer they were in the past. Most trackers champion Paul Lewis sets out his would have set you back at least 1% argument that cash can in fact beat a year if not more in 1995, but the the stockmarket in periods of up to 18 HSBC fund in question now charges years. His case goes like this. Lewis just 0.18%. Over the next 20 years, the found that, since 1995, “active cash” – in cost of an average tracker is likely to fall other words, money kept in a best-buy substantially again, making it harder for account, then transferred a year later to cash to come up trumps. the most up-to-date best-buy account – would have yielded a higher return than Finally, while the HSBC FTSE 100 investing in an HSBC FTSE 100 tracker tracker beat cash in 57% of five-year fund. This “active cash” strategy also periods, the results differ when applied beat the total returns from the tracker to the HSBC FTSE 250. Lewis found in 57% of the five-year periods between that this tracker had a much better result the start of January 1995 and the end between 1 March 1998 and 1 April of December 2015. The effect was even 2016, beating cash in 65% of periods. more pronounced over 14 years, with All in all, Lewis’s research is a reminder cash beating shares 96% of the time. ©iStockphotos that cash can be underrated as an asset Put it in shares, not under your bed class, and that it definitely deserves its It’s a striking finding, although it’s place on your portfolio as an asset all of also easy to pick holes in his thesis. For reverse of what you’d typically expect. its own. But it doesn’t overturn the long- starters, Lewis’s research finds that If the investor had been just as active in held view that for money you can lock investing in the FTSE tracker secures switching to the cheapest tracker, or the up for the medium to long term, the best much higher returns over the longer best value part of the market each year, returns are likely to come from stocks. term. Over periods of 18 years or more, then Lewis’s results may well have been shares outperformed cash more often very different. Best easy-access savings accounts on the than not. And, over the entire 21-year market (according to Moneyfacts) period from 1995 to 2015, shares There’s also the obligatory warning that returned a compound 6% while cash the past is no guide to the future. Just AER managed 5%. The research also makes because savings accounts have fared well Charter Savings Bank 1.66% the assumption that the saver involved over the past 21 years doesn’t mean they is dedicated enough to identify and will continue to do so in future. For the OakNorth Bank 1.65% move his or her money into a best-buy majority of the period that Lewis has Habib Bank Zurich 1.55% account every year, while the investor covered, UK interest rates have been Axis Bank 1.4% is more apathetic, sticking with the positive in real terms (after inflation). tracker through thick and thin – the That simply isn’t the case any more. Back Sainsbury’s Bank 1.3%

The biggest tech takeover deals

American software giant Microsoft Dell/EMC $67bn 2015 raised eyebrows when it agreed to buy Hewlett-Packard/Compaq Computer $31.8bn 2001 business social network LinkedIn for $26.2bn in cash earlier this month. Microsoft/LinkedIn $26.2bn 2016 Many investors are sceptical about the Facebook /WhatsApp $22bn 2014 deal’s value and point to Microsoft’s patchy history of making acquisitions Oracle/PeopleSoft $12.6bn 2005 work (see also page 16). Google/Motorola Mobility $12.5bn 2014 Yet even this enormous sum isn’t quite HP/Autonomy $10.2bn 2011 enough to make it the most expensive Microsoft/Skype $8.5bn 2011 takeover deal in the technology sector to date. That honour falls to Dell’s tie-up Apple/Beats (headphone maker) $3bn 2014 with data storage firm EMC last year. On the left, we look at the top ten tech Facebook/Instagram $1bn 2012 deals as ranked by The Daily Telegraph.

MoneyWeek 24 June 2016 moneyweek.com pensions 23 Should deficits come before dividends? by Natalie Stanton based on best guesses about future investment returns.” Many FTSE 100 companies In most cases, it’s calculated are paying out dividends that on the assumption that the exceed the shortfalls on their pension fund’s returns will be company pension schemes, around the level of the yield leading some commentators on UK government bonds to question whether firms are (gilts). The lower the gilt yield putting enough of a priority goes, the worse the deficit on ensuring that employees’ becomes – and that’s what’s pensions are adequately been happening in recent funded. In total, 54 FTSE 100 years, as yields have headed to companies have handed out record lows. £48bn to investors in the past two years, almost equal to Many funds are now heavily the deficit of their combined invested in gilts – for many pension schemes, which stood Association ©Press years, they were encouraged at £52bn in 2014, according Deficits are not always the scandal they seem to be, as the safest and most to figures compiled by prudent option. However, stockbroker AJ Bell. Some 35 companies a £571m deficit that will need to be bonds show every sign of being in have paid out more in dividends than the absorbed by the Pension Protection Fund a bubble (see page 24) – basing an total size of their pension deficits. (the pensions “lifeboat” that partially investment strategy solely around gilts is protects staff pensions if their company madness. Instead, the sensible approach For example, oil major Royal Dutch pension scheme becomes insolvent). would be to invest elsewhere in assets Shell paid £8bn to shareholders last Meanwhile, the government is consulting and earn a higher return – which would year despite having a £6.7bn funding on plans to restructure benefits paid make their deficits look less onerous. gap in 2014. Pharmaceuticals giant by the British Steel pension scheme (see AstraZeneca paid £2.4bn, compared below) in order to tackle that scheme’s The second issue is that the obvious with a £1.9bn deficit the previous year, £485m deficit. But is there really a case place for pension funds to invest in while GlaxoSmithKline handed out for firms with large deficits to suspend or pursuit of higher returns is in equities. £3.9bn despite a £1.7bn gap in 2014. reduce dividends and funnel the excess These may not be cheap, but dividend Rio Tinto, National Grid, Glencore, cash into their pension schemes? yields are significantly higher than British American Tobacco and Vodafone bond yields and offer pension funds were also among the biggest spenders. There are two main problems with a higher income stream. However, if simplistically comparing dividends firms cut dividends to plug deficits, that Numbers such as these easily generate to deficits in this way. The first is will reduce the returns that pension controversy, given the extent to which the question of what deficits actually schemes can earn from equities. In short, pension deficits have been in the news measure. As MoneyWeek’s editor-in- slashing much-needed dividends to plug lately. Last week, Sir Philip Green chief Merryn Somerset Webb noted last overstated deficits could make corporate faced the Work and Pensions Select time this subject came up in April, pensions’ problems worse – as well as Committee (pictured) to discuss the “A pension deficit is not a number that hitting lots of other shareholders who collapse of retailer BHS, which has left is set in stone… It’s an actuarial concept also depend on dividends.

Abracadabra, the deficit is shrunk – but is the magic legal?

Last week, the FirstGroup Pension Scheme, which provides that inflation-linked increases are based on RPI. In the case of retirement benefits for many employees of bus and train the FirstGroup Pension Scheme, this stipulation did not apply. operator FirstGroup, revealed it has switched its measure from The trustees were permitted to select an appropriate measure the Retail Price Index (RPI) to the slower-rising Consumer Price of inflation, which had previously been RPI but will now be Index (CPI). While this may sound like a very technical change, moved to CPI. the shift will enabled the scheme to wipe £10.8m from its liabilities, making it a useful example of how seemingly minor Most other pension schemes do not have this flexibility, which issues can affect the size of a pension fund’s deficit or surplus. is why proposals to restructure the British Steel scheme are so controversial. The government is considering allowing RPI and CPI are calculated differently, resulting in RPI producing this scheme to switch its inflation index from RPI to CPI, even a rate of inflation roughly 1% higher than that produced by though the scheme rules specifically lock it into RPI. Thus the CPI. Since defined-benefit (also known as final-salary) pension change would not usually be permitted under the Pensions Act schemes mostly increase what they pay in line with inflation 1995, which prohibits retrospective changes to benefits that each year, the measure of inflation they use affects how much have already built up, unless members consent. they are likely to have to pay in future and hence how large their estimated liabilities are. The British Steel scheme is being described as a special case. The change would cut an estimated £2.5bn from the scheme’s Since 2010, CPI has been used to measure annual increases to long-term liabilities, and thus make Tata Steel more attractive public-sector occupational pensions. However, many private- to prospective buyers, potentially saving up to 40,000 jobs, and sector workplace pensions have stuck to the more traditional preventing the scheme from falling into the Pension Protection RPI. The Department for Work and Pensions has estimated Fund. However, the reality is that if one scheme is allowed to that roughly three-quarters of schemes have rules that stipulate bend the rules, others will eventually be permitted to follow.

moneyweek.com 24 June 2016 MoneyWeek 24 cover story What will you do when banking dies? Central banks have been aggressive in their attempts to boost growth. But all they will achieve is the debasement of the currency. That presages disaster, says Dan Denning

In the Great Train Robbery of 1963, the theft of as you can see, in June, the premium went below £2.6m in cash from a Royal Mail train travelling zero. In other words, investors are not demanding between Glasgow and London was accomplished by extra compensation for lending long term – in fact, tampering with the line signals in order to stop the they’re offering a discount. That’s partly driven by train. As robberies go, it was audacious. The haul demand for “safe” liquid assets, such as Treasuries, was worth around £50m in today’s money. But as and partly by an expectation that rates will remain criminal masterminds go, the gang of 15 robbers low and that deflation is a bigger risk than inflation, who pulled off one of the most infamous heists in which means investors actually see longer-term British history can’t compare to the current gang bonds as less risky than short-term ones (better to running the world’s central banks. Those people lock in a higher yield now than risk being rolled over – Janet Yellen, Mario Draghi, Mark Carney, and into a lower one in a few years’ time). Haruhiko Kuroda – have pulled off an even greater heist. By tampering with price signals – short-term Yet this is extraordinary. It suggests that despite the and long-term interest rates – those central bankers radical actions of central banks – and an absence of have put trillions in global savings at risk. While the actual deflation in the US statistics – investors have “When world has focused on the risks of Brexit, a bigger written off the idea of inflation ever taking wing. you have and more dangerous risk has emerged – that the And it’s not just in America. For a brief period in governments “endgame” for central banks results in massive falls June, the entire Swiss yield curve – that is, bonds of in both stock and bond prices. all maturities, from short-term to the 30-year – was issuing 20-, negative. In other words, investors were paying 30-, 50-, and Unprecedented distortions the Swiss government to be allowed to lend it their That interest rates could rise again – contrary to the money for anything up to 30 years. This reflects even 100- expressed interests of central banks – may seem a extreme risk-aversion – a panicked flight to safety

year bonds remote possibility. After all, the US Federal Reserve among institutional investors, which also drove Association ©Press at low rates, has already backed off on its plan to “normalise” yields on ten-year German bunds into negative rates this year. The immediate culprit was the territory, and ten-year gilt yields to record lows. and investors weakest jobs report in six years in May. Markets snapping them expected 160,000 jobs to be added – instead they You know we’ve reached an unusual point in got 38,000. As a result, traders now reckon there economic history when a desire for financial self- up, you have won’t be another US rate hike until February 2017, preservation means accepting a small amount of a dangerous and Fed boss Yellen has done little to discourage wealth destruction in order to avoid the perceived situation“ that view. In response, ten-year US Treasury yields risk of a larger one. With more than half of all touched a low of 1.57% in mid-June. global government bonds – around $10trn – on negative yields, the seeds have been planted for a That in itself wasn’t that alarming. But what devastating bond market wipe out. When you have happened next was. The “term premium” on the governments issuing 20-, 30-, 50- and even 100-year ten-year Treasury bond fell to a record low, turning bonds at low rates, and investors snapping them up, negative, as you can see from the chart below. What you have a dangerous situation. does that mean? Estimating the term premium is not a precise art, but Bond investors are now risking huge amounts of think of it as the capital on a bet that rates won’t rise for a very Treasury ten-year term premium extra yield that long way into the future. Yet given that rates are investors demand currently at or near all-time lows, doesn’t that seem 5 for taking the foolhardy? It’s precisely when everyone thinks a risk that goes trend can only go in one direction that you have 4 with lending to think differently. The big moves – the ones that over a longer ruin or reward investors – happen when you least 3 rather than a expect them. This really is an important point. shorter period of Central-bank bond buying – and the general climate 2 time – inflation of fear about the endgame of this whole monetary might surprise experiment – has driven long-term yields down to Percentage points Percentage on the upside, for these levels. From here they can go marginally lower 1 example. As the – but rates can only go so negative before investors name implies, favour cash instead (we’ll discuss this more below). 0 you’d generally Or, they can stay low for a long period of deflation expect it to be and stagnation (in which case, bonds make perfect 65-69 70-74 75-79 80-84 85-90 90-94 95-99 00-04 05-09 10-14 positive – but sense). Or they can go up higher and faster than

MONEYWEEK 24 June 2016 moneyweek.com ©Press Association ©Press Mario Draghi and Mark Carney: the masterminds behind the greatest heist in history

anyone currently imagines. It’s this last scenario that a three-pronged strategy (not to be confused with worries me the most. What could bring it about? Abenomics and its “three arrows”). Prong one: buy Japanese government bonds (JGBs) to push down What comes next? rates and boost bank lending – the BoJ now owns We know negative interest rates provide an incentive a third of the entire JGB market, and it has bought for dangerous risk-taking. When central banks force pretty much every JGB issued in the past three years, rates down by hoovering up trillions in government according to the FT. Prong two: buy exchange- and corporate bonds, they force other investors – traded funds (equities, in other words) as part of its “In Japan, from banks to pension funds to people like you and asset-purchase programme. Prong three: take deposit negative rates me – to take greater risks with their capital in the rates negative to encourage lending. hunt for yield. But what will the catalyst for the big are currently breakdown be? After all, Yellen clearly has no desire It’s this third prong I want to pay attention to. Japan only charged to raise interest rates, and the European, Japanese isn’t the first central bank to do it, but arguably it is and British central banks are all still way behind the the most open to radical policies, particularly as it is on deposits Fed. So what could see interest rates rise, bond prices still struggling to get anywhere close to its inflation held at the crash, and inflation run rampant? target. Negative rates are currently only charged central bank on deposits held at the central bank by commercial If anywhere will give us the answer, it’s Japan. banks. But the direction of travel is pretty clear. by commercial It’s been at the forefront of unconventional economic Let’s assume the world remains mired in stagnation, banks. But the policies ever since its bubble popped in 1989. with low growth, low inflation, and seemingly no First we saw government spending on projects way out. Central banks won’t shrug their shoulders direction nobody needed (“fiscal stimulus”). That helped drive and move on. They’ll get ever more radical. There of travel is Japan’s government-debt-to-GDP are three things to watch out for: pretty clear“ ratio above 200%. There were helicopter money (printing money also half-hearted early efforts and handing it out as directly as at quantitative easing (QE). But 1.57% possible), negative deposit rates on Japan has taken the monetary The low reached by your savings (not just commercial madness to new levels since bank reserves), and “stamped Haruhiko Kuroda took over at ten-year US treasury the Bank of Japan in 2013, with yields in mid-June Continued on next page

moneyweek.com 24 June 2016 MoneyWeek 26 cover story

Continued from previous page too. Stamped money is money that requires a government money”, or cash that expires. stamp on it to be considered Let’s look at each in turn. legal tender. The concept was developed by 19th- Helicopters and vouchers century German anarchist In Japan’s case, helicopter Silvio Gesell. His ideas were money could take off in two even briefly implemented in ways in 2016. The first is via 1932 in the Austrian town of debt monetisation. That’s Wörgl. The idea is that the when a central bank prints money depreciates in value, money to buy government and so must be spent before bonds directly – so it’s it is worthless. Here’s how fiscal policy (government it would work. You have spending) financed by to pay the government for money printing rather than the stamp – imagine larger borrowing or tax hikes. denomination notes having Japan has done this before, a higher tax. Or imagine in 1932. As part of a plan to paying a lower tax the more bolster its economy after the money you bring in to get 1929 crash, Japan’s then- ©Getty Images stamped. Or imagine that finance minister, Korekiyo Can governments force her to spend it? money without a stamp is Takahashi, ordered the BoJ simply money that has expired, to print money to buy government bonds, which worthless despite its face value. As crazy as it underpinned both infrastructure spending and the sounds, this is probably how cash will be phased out financing of the Japanese war machine in the 1930s. when the monetary endgame arrives. An alternative By 1935, the economy had picked up, inflation was digital currency will have to be introduced in rising fast, and Takahashi decided to cut spending. parallel with physical cash. You penalise the use of But the military didn’t like the sudden austerity, cash, to herd people into the new digital currency, and assassinated him in 1936. His successors whereupon negative interest rates can then be “Modern were understandably reluctant to cut off funding, imposed with a keystroke. Cash that expires if central and inflation soared as a result. Despite the risks, not used by a certain date – well, that’s about as bankers, in today BoJ governor Kuroda could be tempted by powerful an incentive as you can think of to spend. Takahashi’s apparent pre-assassination success. The their desire to government would issue “perpetual bonds” that pay Money is not wealth boost growth, no interest, and are continuously refinanced with the “If you wish to destroy a nation, you must first BoJ as buyer of first and only resort. corrupt its currency,” wrote Adam Fergusson in his have made the 1975 classic on the Weimar inflation, When Money destruction of Alternatively, there’s another helicopter-money Dies. “Thus must sound money be the first bastion sound money option that Japan has also already tried. In 1999 of a society’s defence,” he added. It was sage advice and 2009 the government distributed “shopping during the last period in our economic history their central coupons” to consumers, hoping to boost spending. when inflation destroyed the savings and retirement project“ It didn’t work, but mainly because the coupons dreams of an entire generation. And today, modern applied only to certain goods, and most had an central bankers, in their desire to boost growth, have expiry date of six months – they weren’t a cash made the destruction of sound money their central equivalent. Future helicopter money would instead project. We’re at a stage where it’s hard to see how have to get a cash-like substance directly into the we avoid a future monetary crisis. The lower rates hands of consumers, then introduce an element of go, the more extreme central banks’ efforts to avoid “time decay” so they want to spend it. or escape deflation will become. The more desperate their policies, the greater the risk that we’ll see Taxing your savings destructive levels of inflation. That takes us to negative deposit rates. One way to get Mrs Watanabe (the proverbial Japanese Government bonds and even cash itself may provide housewife) to spend is to tax her savings. no refuge, although both provide liquidity of last MoneyWeek regular Tim Price has already written resort in a deflationary crisis. You could own extensively on the impact of negative rates on your tangible assets outside the financial system (such as money in his book The War on Cash. But in short, precious metals). But what else? Are you powerless negative rates would mean your savings get smaller, in the face of the coming crisis? I believe that this rather than larger, the longer you leave them in the question is so important that I’ve made it the sole bank. The idea is that this encourages you to spend. focus of this year’s MoneyWeek conference: it’s called “When Banking Dies: How To Prepare For The trouble is, in Japan the mere threat of negative The Monetary Endgame”. It will be held on Monday rates has led to soaring sales of safes. In Europe, 3 October in London (see page 21 for more details). where commercial banks have been subjected to negative rates, some have taken to hoarding physical Meanwhile, whatever happens with this week’s EU cash in vaults rather than keep it with the European referendum, remember: it’s a sideshow to the main Central Bank. That hardly inspires confidence. event. I can’t tell you what comes next for sure. Thus the policy is doing exactly the opposite of But I hope I’ve shown that we are approaching the what it was designed to do. A measure to increase endgame of this grand monetary experiment, and spending actually increases hoarding, thus that I’ve highlighted some of the warning signs to accelerating the coming of the monetary endgame. watch out for. It could come methodically or all at But central banks have a plan to punish hoarders once. But come it will. Prepare yourself now.

MoneyWeek 24 June 2016 moneyweek.com Spread Betting | CFDs | Forex

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Leveraged products are high risk, losses may exceed deposits

Celina-Brooks-Money-Week-Advert-02-PRINT.indd 1 09/06/2016 14:14 investing in property XX

28 investing in property A stamp-duty trap for landlords by Matthew Partridge a long time before buying a new property would seemingly not The new stamp-duty rules that receive this exemption, so it is came into effect earlier this year a complication that buy-to-let included an anomaly that could landlords who don’t own their catch out buy-to-let landlords own house may need to keep in who rent, rather than own, mind in future. their main residence, says Paul Lewis in the Financial l Chinese investors have been Times. Since April, those who high-profile buyers of property buy an additional property in London for many years. Now, have to pay an extra 3% in they are increasingly looking stamp duty. This is meant to to invest in UK cities such curb the advantages that buy- as Manchester, according to to-let landlords may have over stories in a number of sources,

other buyers, as well as deter ©iStockphotos including the South China those who own second homes. Rental yields are attractive in Manchester Morning Post and the BBC. However, to cushion the blow for existing landlords, those who owned like Page who are replacing a rented That’s not surprising, given that investors multiple properties were exempt from main home with one they buy”. This get significantly more for their money the tax if they were buying a property is also bad news “for those who turn in the north of England, says Hansen to replace their main residence, and also temporarily to renting after a job move Lu of Capital Economics. Average sold the main residence. The rules were and end up with a rented main home and house prices in five key northern cities written so even those who waited for up another they at least partly own”. (Manchester, Liverpool, Leeds, Sheffield to three years before selling their main and Newcastle) are £143,100 less than a residence could get a duty refund. Fortunately for Page, his case seems third of the London average of £470,000. to fall under an exemption granted by Some of this gap can be explained by the But one FT reader seemed to have been the government in March of this year, fact that workers in London earn more snared by a loophole in the rules. noted Lewis. The Treasury has decided than their counterparts in the North David Page, an estate agent from Kent, that those who sold their main residence (they can afford to pay higher prices). had sold his main property in 2008, before November 2015 will have until However, the gap in prices is too great well outside the three-year window. late 2018 to buy a replacement, while still for that to account for the full difference. He then bought three buy-to-lets with the being able to reclaim stamp duty. proceeds, while he had moved to rented Hence rental yields are somewhat more accommodation. Recently he bought a The downside of this concession for attractive: gross rental yields range from new main residence, only to be hit by the government is that it will certainly around 4% in Manchester (slightly stamp duty because he had not recently reduce the money that the new tax is higher than London) to more than 6% in sold, or was selling, his main property. expected to raise, projected to equal Leeds. But given house prices are unlikely £825m in 2019/2020. But it appears to rise rapidly and rents are likely to be Naturally, he argued that this was fairer, as it avoids catching out landlords the main source of returns, the fact that “unfair” – and he has a point, says who could have had no idea that the new yields are low by historical standards Lewis. “It is hard to see the logical stamp-duty rules would be introduced. makes rising foreign investment look like difference” between landlords replacing However, those who subsequently sell up further evidence of a bubble that will pop a house that they own “and landlords and move into rented property and wait once interest rates begin to rise.

Guess the price: 18 Canon Street, Taunton, Somerset A £250K parking spot A parking space has gone on This Grade II-listed house, the market in London’s wealthy set over four floors, is a Knightsbridge area for £250,000 – short walk from the centre £25,000 more than the average house of Taunton. It has walled price in England. The space also gardens and courtyard. comes with an annual £743.32 service The property has recently charge, and buyers of the 87-year been restored and divided lease must live within a 400-metre into two two-bedroom radius. But it’s close to Harrods, so flats, with four extra at least it will be handy for shopping bedrooms on the top trips. However, any owners of a two floors. Lamborghini Aventador, the £265,000 supercar marque favoured by the The house retains many super-rich, may want to steer clear, of its original features, says the Daily Mirror. At just 2.35 including period fire metres wide and 5.7 metres long, the surrounds and sash space would be a tight squeeze for the windows. Can you two-metre wide car – a problem made guess the asking price? worse by being located next to a pillar (Answer on page 41.) and at an angle to the road.

MoneyWeek 24 June 2016 moneyweek.com

XX money makers

30 money makers

Unicorn takes on the banks will still be transferring just Taavet Hinrikus, 37, has 1% of the money that crosses nothing to hide and the CEO borders.” The 35-year-old still of TransferWise isn’t shy of has strong ties to his native stripping off to illustrate the Estonia, where he joined point. Since he and co-founder Skype as the company’s first Kristo Käärman launched employee. “The biggest thing their currency-transfer it taught me is that anything business in 2011 they have is possible. You can build regularly paraded through a piece of software in the London in their pants in outskirts of an ex-Soviet city protest at what he describes which changes the way we as the poor service provided communicate forever.” by banks transferring money abroad. TransferWise claims From refugee to power broker to offer a much cheaper Malik Karim, 55, one of the service by matching users calmest power brokers in the sending money in one City, spent his first year in direction with those sending the UK in refugee camps. He it the other way. “We’re being grew up in Uganda, where his Joanna Jensen is selling her stables. The former horse honest and transparent,” he father ran a café, but Karim’s breeder, who left a career in investment banking, says her tells The Times. “That’s a family was forced to flee when children’s-toiletries business has taken over her life. Jensen credits her daughters, Mimi, ten, and Bella, seven, for her new pretty different way of doing he was 12, after dictator Idi venture, Childs Farm, which began in 2010 as a homemade business compared to a bank.” Amin expelled all Asians from recipe to soothe their skin. It is now a fully fledged business the country. “I missed a year with sales of more than £2m. “When I had my two girls With a million users in 60 of school,” he tells the Evening I felt that everything I bought for them that was organic countries, TransferWise Standard, “which was great.” just looked medicinal,” Jensen tells the FT. “Bath time was moves £500m a month. The Karim spent a year in military hell... I needed to do something.” She foraged in hedgerows, company has raised $100m bases. Forty-four years later consulted natural remedy guides, and eventually made her (£69m) from investors, and he is sitting in a walnut- first formulas. Parents on a budget are not the brand’s target including Sir Richard panelled boardroom in the market, but Childs Farm is now the fastest-growing baby brand in the UK and industry grown-ups are looking over their Branson, and enjoys rarified City. He raced through shoulders. “I want to be going head-to-head with Johnson & status as one of Britain’s school and was sucked into Johnson,” Jensen says. “We want the range to grow up with few “unicorns”, a privately a mergers and acquisitions the kids... A lot of kids at boarding school already use the owned tech firm valued at boom in the 1980s, but was shampoo”, while parents are “desperate” for an adult range. $1bn plus – a valuation that fired from Credit Suisse in a “I have huge ambitions for this brand.” Hinrikus shrugs off. “We’re restructuring. all running a marathon and this is like kilometre No. 2.” Former clients pledged to recent sale of its SunLife says. He met his wife in an The company lost £11m last back him if he launched his pension group. Fenchurch airport queue and their son year. “It’s pretty obvious that own business, so Fenchurch is trusted, one client says, is about to go to Oxford, but the losses are the investment was born, advising financial because finance firms would Karim doesn’t care about the we are making to grow,” he services firms on deals. rather go to Karim than let a “material stuff” in life. “The says. “There’s an opportunity With 22 dealmakers, it is rival bank rummage through most important gift anybody to build companies faster than celebrating a record year, their business. Being fired can give their children is love ever before. If we grow by pushing clients through six from Credit Suisse has become and attention, and my parents ten times, which we will, we takeovers, including Axa’s “a badge of honour”, Karim gave me that in bucketloads.”

The MoneyWeek audit: Meat Loaf

■ How did he start? ■ What was his big break? ■ How much has he made? Singer Meat Loaf, who In 1973 Meat Loaf won a role in The Meat Loaf has had a turbulent career, made headlines after Rocky Horror Show and later in the film going bankrupt in the mid-1980s as his collapsing on stage version, The Rocky Horror Picture Show. career deteriorated amid a protracted in Canada last week, Around the same time he began working legal dispute with Steinman and others. was born Marvin Lee on the first Bat Out Of Hell album with He and Steinman later put aside their Aday in 1947 in Dallas, songwriter Jim Steinman, who he differences and worked on Bat Out Of Hell Texas. His father, an had met while auditioning for II: Back Into Hell, which resurrected Meat alcoholic, was a police another musical. It was released Loaf’s career and restored his finances. officer and his mother a in 1977 and became a huge A long-running court case between gospel singer. He began hit, selling 43 million copies Cleveland International, the record label performing in musicals worldwide and spending more for which Bat Out Of Hell was recorded, while at high school. than 470 weeks in the UK and Sony, which distributed the album, After his mother died charts. Meat Loaf is one of the subsequently revealed that Sony had in 1967, he moved to bestselling artists of all time, failed to pay Meat Loaf, Steinman and Los Angeles where he with 80 million records sold Cleveland many of the royalties that worked as a bouncer, worldwide. He has appeared they were due. Meat Loaf eventually and started a band, in more than 50 films and TV settled with Sony in the late 1990s on Meat Loaf Soul, named shows, including Fight Club undisclosed terms that were reported to after her favourite meal. and Wayne’s World. be up to $9m for him and Steinman. ©Alamy

MONEYWEEK 24 June 2016 moneyweek.com Business problem. Business solution. Charitable outcome. www.sharegift.org

Registered Charity No.1052686 The share donation charity 32 personal view

If only you’d invested in… Prospering in turmoil 32Red (Aim: TTR) is an online casino, poker and bingo company registered in A professional investor tells us where he’d put his money. Gibraltar. It listed on Aim in 2005, and in the year immediately after listing This week: Mark Page, Artemis European Opportunities Fund the share price slumped, wiping 70% off the value of the company. However, Economic activity GrandVision (Amsterdam: GVNV), the last six years have seen the shares in parts of Europe a Dutch retailer of eyewear such as climb more than 800% and double in has stagnated for spectacles, sunglasses and contact the past year. In July 2015, it acquired the best part of a lenses, is well positioned for growth. the Roxy Palace online casino for decade. Despite this GrandVision’s size means that it can £8.4m. A trading update in January a number of stocks buy lenses for prices that can be 30% 2016 showed net gaming receipts up by 51% in the previous year. and industries have lower than those available to smaller grown irrespective retailers, who it can undercut on price of the ups and while also enjoying higher margins. 32Red downs in GDP data. Even during a grim Not surprisingly, many smaller firms are (Aim: TTR) 180 decade of repeated crisis and last-minute selling out to GrandVision, enhancing Figures in pence bail-outs, my colleague Laurent Millet its organic growth and adding to its 160 and I have been able to find European competitive advantage. 140 companies that have prospered. 120 German pharmaceutical giant Bayer 100 Payment processing is a good example (Frankfurt: BAYN) will need to issue 80 of an industry that is seeing more debt to fund its $62bn bid for 60 transformative, or “secular”, growth. Monsanto. Yet the two underlying Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Electronic and card payments are businesses – pharmaceuticals and growing while payments by cash and crop protection – produce strong and cheque are flat and in sharp decline predictable cash flows, so Bayer should Be glad you didn’t… respectively. The reasons for this be able to repay its debt quickly. And structural shift to electronic payments borrowing costs are at historic lows: Mayair Group (Aim: MAYA) is a are obvious: shoppers find it faster, safer the yield on Germany’s ten-year bund Malaysia-based company that manufactures and installs industrial, and convenient. But while paying by recently dipped into negative territory for commercial and residential air card or smartphone appears easy to the the first time. Moreover, the European purifiers, operating mainly in China. customer, carrying out the transaction Central Bank (ECB) is now buying The company was established in depends on a complex ecosystem corporate bonds as part of its extended 2001, and listed on 7 May 2015, raising involving multiple intermediaries. quantitative-easing programme. In a £16.2m. Despite rising revenue and Completing the sale requires an roundabout way, the ECB will help to profits – up 49% and 47% in the six acceptance system (the point-of- fund the deal. months to 30 June last year – the sales terminal in a physical store or a shares have followed a relentlessly “gateway” for purchases made online) Despite this, news of the deal saw Bayer’s downward path since listing, shedding more than 60% of their value. followed by multiple stages of processing shares fall. These short-term disruptions by a payment service provider to acquire, can present long-term investors with Mayair Group authorise and clear the transaction. opportunities. Like Europe as a whole, (Aim: MAYA) Figures in pence Bayer might not seem the most exciting 140 Half of all payments in Europe are investment, but appearances can deceive. still processed by banks. However, 120 regulatory pressure from the European 100 Commission means pricing pressures The stocks Mark Page likes 80 are increasing, making the processing 12mth high 12mth low Now 60 of payments uneconomical for most WLN €27.825 €17.90 €25.79 lenders. French payment processor Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Worldline (Paris: WLN) is ideally GVNV €27.80 €21.455 €23.75 positioned to consolidate this sector. BAYN €138.00 €83.45 €91.06 ©The Telegraph 2016 ©The Telegraph

MoneyWeek 24 June 2016 moneyweek.com

moneyweek.com 24 June 2016 MoneyWeek the best blogs 33 We must rethink It’s time to build that ark wealth taxes American pundit Doug Casey believes Some candidates for the 2017 French we are heading for a “super depression” presidential election are going to propose that will follow the collapse of this to abolish the wealth tax. That would “debt super cycle”. Most people hear be a serious mistake, says economist these alarm calls, then just reach over Thomas Piketty on his blog. The tax and hit the snooze button, says Tom could, however, do with reform. Chatham on the Zero Hedge blog. But it’s time to wake up. This is a generation In France, as in all countries, the main that has only ever known post-World- tax on wealth is the property tax. War-II levels of prosperity – easy credit But this is more regressive than it seems. and instant gratification have created In principle, it is proportional – levied at a nation of “whining, self-absorbed, 0.5% of the value of the property. But entitlement-minded people with no moral the other wealth tax in France only really or mental toughness”. They will “pay falls on the top 1% of the population and dearly” for this in “the coming days”.

doesn’t take account of debts. So a person ©Alamy owning a property worth €200,000 but Act now before it’s too late: you need Be like Noah: get prepared for the flood with debts of €150,000 pays the same tax to be Noah on his ark, not the people as one who inherits a €200,000 property drowning as he floated off. Build up the resources you’ll need to provide food, shelter, but who also holds financial assets worth clothing and security when the system fails to do it for you. Store useable goods for the €300,000. This is explained by the fact short term, and things like gold, silver and “production equipment” for the long term. that the property tax was created more What will you do when you can’t find a job? Do you have a home you can hang on to than two centuries ago, as were the when the system breaks down? What about fuel? These are the questions you should similar systems in force in the US and be asking yourselves now. “You better have a good answer because your family will be most countries, at a time when property asking them when the greater depression sets in.” was predominantly held in the form of land and real estate, and when financial assets and debts barely existed. A way to promote long-termism We could make the tax system fairer by Here’s a radical plan, says Jamie said than done. Ries says his idea ruined deducting debts and taking financial Condliffe in the MIT Technology his credibility when he first floated it in assets into account. As the Panama Review: create a new stock exchange 2011. Since then, he has been building Papers affair and other scandals have that values long-term innovation over a team to make it into a reality. Venture underlined, it is also important to short-term profits. It is the brainchild capitalist Marc Andreessen and former introduce more transparency. We have of Eric Ries. He suggests creating an US chief technology officer Aneesh other priorities than giving the rich a exchange that would list companies that Chopra are onboard and their team is in tax break: taxes should fall more on give far less prominence to quarterly early discussions with the US regulator. the rich than on wages, and the state reporting, that tie employee pay scales But don’t hold your breath. Getting should invest in training and research. to long-term success in the market, give approval will be a lengthy process; In a period in which assets prosper while shareholders more say the longer they finding firms willing to sign up will be salaries stagnate and society is in crisis, hold their shares, and require firms to too. People who like this idea will just this is not the time to be bestowing gifts disclose in detail how they are investing have to develop the patience that Ries on the wealthy. its money. Of course, this will be easier thinks is a virtue for investors.

How to invest like Sherlock Holmes

If you want to be a good investor, interesting?’ ‘To a collector of fairy- you need to be a student of human tales.’” behaviour, says Morgan Housel on The Motley Fool. So it might pay to learn On advice: “Nothing clears up a case so from the master: Sherlock Holmes. much as stating it to another person.”

On theory: “It is a capital mistake to On con men: “My horror at his crimes theorise before one has data. Insensibly was lost in my admiration at his skill.” one begins to twist facts to suit theories, instead of theories to suit facts.” On quickly drawing false conclusions: “There is nothing more deceptive than

On debates: “If falsehood, like truth, had ©Rex Features an obvious fact.” only one face, we would be in better shape. For we would take as certain the opposite of what the liar said. But the reverse of On simple ideas being so obvious no one takes them seriously: truth has a hundred thousand shapes and a limitless field.” “The world is full of obvious things which nobody by any chance ever observes.” On forecasts: “When Dr. Mortimer had finished reading he pushed his spectacles up on his forehead and stared across On doing nothing when nothing needs to be done: “You have a at Mr Sherlock Holmes. The latter yawned and tossed the end grand gift for silence, Watson. It makes you quite invaluable as of his cigarette into the fire. ‘Well?’ said he. ‘Do you not find it a companion.”

moneyweek.com 24 June 2016 MoneyWeek profile XX

34 profile

This week: José López The ex-minister, the nuns and the $9m

One morning last week, just before Fernanda Herrera – “best known in dawn, an early rising resident of a quiet Argentina for her career as a glamorous Buenos Aires suburb was struck by an former model” – argued that her client unusual sight. A middle-aged man was suffered hallucinations and was mentally heaving several sacks and bags over unfit to testify, although doctors had the wall of the neighbouring convent. ruled him fit. “López proceeded to hit He then clambered in after them. Fearing himself over the head… and demand to for the safety of the three elderly nuns be supplied with cocaine.” inside, the observer called the police. Before long, says The Guardian, “what Exactly how López acquired the money, began as a neighbourhood curiosity” which he apparently intended to bury had morphed into “a national political in the nunnery, is now the focus of the drama” which is gripping Argentina. investigation – and it may not bode well for Fernández, or the leftist The mysterious man – whom police kirchnerismo movement she heads, eventually found cosily ensconced with says the Financial Times. As well as the sisters in the convent’s kitchen – serving in their governments, López was turned out to be José López, a former reportedly “extremely close” to both junior government minister, who had Fernández and her late husband and served as public works secretary to predecessor, Néstor Kirchner. Ever since the ex-president Cristina Fernández de the party’s narrow electoral defeat at the Kirchner. Officers later found a semi- hands of centre-right President Mauricio automatic rifle in his car, but even more Macri last year, Fernández and her circle ©Getty Images extraordinary were the contents of the have been dogged by constant allegations farmland in Patagonia. A huge dig sacks, says Newsweek. As well as several of money-laundering and corruption ensued, says The Guardian. Even Néstor “expensive watches”, they contained 160 related to public building contracts – Kirchner’s “imposing mausoleum was bundles of cash currencies, including threatening to scupper her hopes of searched”. But nothing was found. pesos, dollars, euros, yen and Qatari standing again in 2019. riyals. The total stash amounted to $9m. Fernández has denied any links with Earlier this year, construction boss the López case. But some in Argentina López at first claimed to be a church Lázaro Báez (allegedly a front man for think this latest soap opera could prove official, then allegedly tried to bribe the presidential couple) was arrested on the final nail in the party’s coffin. officers with $1m to avoid arrest. money-laundering charges, following “José López couldn’t bury the dollars, The saga continued with a bizarre allegations that he had buried an but he buried kirchnerismo,” concluded court hearing in which López’s lawyer, enormous stash of cash in remote La Nación last week.

Great investors in history

This week: Alfred Winslow Jones He outsourced a lot of his stockpicking to a team of analysts who were selected by getting them first to run paper portfolios. How did he start out? Unlike most other great investors, with Did this work? the possible exception of Georges Jones’s fund made money in 31 of the 34 years that he ran Doriot, Jones didn’t become involved in it, compared with nine years for the S&P 500 over the same investment management until he was period. Despite charging relatively high fees, the fund still nearly 50. After graduating from Harvard returned more than 20% a year for an investor during its first in 1923, Jones changed career several two decades of operation. The fund still exists as a “fund of times. He worked as a purser on a tramp funds”, with $390m in assets under management. The hedge- steamer, had a spell as a diplomat, and fund model has also spread rapidly, with an estimated $2.7trn then became a sociology lecturer, before under management today, according to BarclayHedge. going on to write for various publications, including Fortune magazine. Writing an article on technical analysis sparked What lessons are there for investors? interest in Wall Street. In 1949, he founded A. W. Jones and Studies suggest that the hedge-fund industry has become Company, one of the first “Hedged Funds”. He ran it for more oversaturated, driving down returns – since 2009 the HFRI than 30 years, before handing over control in 1984. Hedge Fund index has returned just 50%, against around 200% for the S&P 500. As with any other area of active management, What was his strategy? managers like Jones are the exception rather than the rule. Jones’s idea was to “hedge” long positions with short ones. However, there are a couple of tips from Jones that private In theory, this meant his returns would not be affected by the investors can use. Firstly, running a “paper-trading” account overall market direction, but rather his ability to pick winners is a good way of trying out a strategy to see whether it works and losers. In reality, the fund was not always fully hedged. (and if you are comfortable with it), before risking real money. Indeed, in the early 1970s it had a leveraged long position (in Secondly, Jones’s problems with excessive leverage in the other words, it was aggressively betting on a rising market, early 1970s show the dangers of taking big bets with borrowed and so it ran into trouble when the opposite happened). money – regardless of how confident and capable you are.

MoneyWeek 24 June 2016 moneyweek.com spending it 35 A five-page section covering holidays, cars and housing Escape into the wilderness Tiger-spotting in Russia At the extreme edge of Russia, close to China and seven hours ahead of Moscow, “ghostly swamps are frozen over”, says Sophy Roberts in the Financial Times. Here in Khabarovsk, where the temperature can slip to well below freezing, there are no tourists. It has little history of attracting visitors. But there are tracks in the snow that tell you the rare Siberian tiger lives close by. Only 500 are thought to be left in the wild. Just as Roberts is starting to wonder if all she’s going to see is “wind- torn cloud and a billion birch and alder”, the guide spots a line of pug marks in the fresh snow, indicating the presence of a tiger close by. She caught a glimpse, just before he vanished, “the flash of black and orange disappearing among the skinny tree trunks”.

From £2,325 per person – see NaturalWorldSafaris.com.

A trekking adventure in Khabarovsk in Russia could lead you to the rare Siberian tiger

the wild bison still roam, along with develop sustainable tourism in the forest. wolves and lynxes, although logging Certainly, “there aren’t many places left now threatens to disturb the peace. to glimpse Europe’s wild past”. Wild Poland, led by naturalist Łukasz Mazurek, seeks to reconnect visitors From £785 per person for seven nights – with the untouched forest, says see WildPoland.com. Ros Coward in The Guardian. From the traditional wooden Wejmutka Manor Rustic paradise in Kyrgyzstan hotel guesthouse, you venture out to If your idea of paradise is yurts and the forest edge early in the morning. hot springs lost in mountain valleys a Wild bison still roam in Białowieza forest On Coward’s trip, the bison emerged thousand miles from anywhere, then out of this mist as if a primitive cave Primeval woodland in Poland painting had come to life. Much of the Poland’s Białowieza forest, straddling the area is swampy and feels mysterious, border with Belarus, is the last remnant with black storks skulking in dark of a vast primeval woodland. Here, pools. Conservationists are keen to

How to survive in the great outdoors

You’ve done everything right and still ended up lost in the wilderness. Welcome to the club, says adventure writer Mark Jenkins in The Guardian. The thing to do is let the panic pass and think clearly. Remember the acronym, “Stop”. S is for “stop”. T is for “think”. What was the last landmark you recognised? How long ago was that? Meadows miles from anywhere in Kyrgyzstan O is for “observe”. Can you see any landmarks? P means “plan”. Is there enough daylight to retrace your steps? Should Kyrgyzstan is for you, says Giles Whittell you build a fire? Can you make a phone in The Times. Walking up the “most call? Food is the least of your worries, but perfect mountainscape on Earth”, the water and staying warm are critical. If you do regain the trail, “hightail it out and get Altyn Arashan valley bends with its river, back to your car”. The last thing you want revealing new meadows carpeted with is to spark a search and rescue mission. edelweiss when not grazed upon by sheep Otherwise, except in canyon country, your and horses. The topography is Alpine, best bet is to move downhill. Eventually the scale Himalayan. But “more than you’ll come to a road or a path. “You don’t anything”, it is Kyrgyzstan. die from not knowing where you are. You die from bad decisions.” From £2,555 per person for a 13-day tour – see Regent-Holidays.co.uk. moneyweek.com 24 June 2016 MoneyWeek 36 property

This week: properties for around £500,000 – including a 17th-century thatched cottage in Crediton, Devon, a restored castle in Salers, France, and a beachside apartment in Ramsgate, Kent

Castle, Cantal, Salers, France. A restored castle in a valley, surrounded by parkland gardens. It has large fireplaces, access to the 15th-century rampart walk and restored outbuildings in the grounds, including a heated swimming pool. 5 beds, 2 baths, 3 receps, library, 49.4 acres. £500,000 Groupe Mercure +33 (0)666 792 653.

Beach Retreat, Marina Esplanade, Ramsgate, Kent. A contemporary apartment in a prime beach-front location with views over the Royal Harbour and Sandwich Bay. It has floor-to-ceiling windows and a balcony. 2 beds, 2 baths, open-plan living room/ kitchen, garage parking space. £495,000 Strutt & Parker 01227-451123.

Glebe Cottage, Woolfardisworthy, Crediton, Devon. A 17th-century, Grade II-listed thatched cottage with country views. It has a stone newel staircase, beamed ceilings, oak-framed leaded windows and an inglenook fireplace with a wood-burning stove. 4 beds, 2 baths, 3 receps, gardens, paddock, orchard, 1.4 acres. £525,000 Savills 01392-455755.

MoneyWeek 24 June 2016 moneyweek.com property 37

This week: properties for around £500,000 – including a 17th-century thatched cottage in Crediton, Devon, a restored castle in Salers, France, and a beachside apartment in Ramsgate, Kent

Lintzford House East, Lintzford, Tyne & Wear. This Grade II-listed, semi- detached Georgian house is part of a conversion of a former paper mill and is set on the riverside at the edge a village. It has wood floors and a traditional marble feature fireplace. 4 beds, 3 baths, 3 receps, garage, gardens. £495,000 Sanderson Young 0191-213 0033.

Nithbank House, Thornhill, Dumfriesshire. A Grade C-listed house dating from the 1800s on the banks of the River Nith. It has a large kitchen, landscaped gardens and a stone barn with planning permission for conversion into a three-bed cottage. 6 beds, 4 baths, 3 receps, tennis court, 4.4 acres. £525,000+ Knight Frank 0131-222 9600.

British School House, Moreton-in-Marsh, Gloucestershire. An 1840s former headmaster’s house with exposed stonework, beamed ceilings and a drawing room with a double-height vaulted ceiling. 2 beds, bath, 2 receps, galleried library, garden. £500,000 Strutt & Parker 01608-650502.

West Scholes, Queensbury, West Yorkshire. A 17th-century, Grade Almeida Street, London N1. II-listed former farmhouse A basement flat in a Victorian house and brewery with country close to the main shopping area and views. It has stone inglenook transport hub of Angel, Islington. fireplaces and a large It has wood floors, an open-plan kitchen with an Aga. 5 beds, living area and good storage. 1 bed, 3 baths, 2 receps, library, bath, share of freehold. £494,950 Savills outbuildings including a 020-7226 1313. workshop, former stables, dairy, gardens. £499,950 Hunters 01422-385137.

moneyweek.com 24 June 2016 MoneyWeek cars XX

38 cars McLaren’s theatrical supercar Most supercars are about as practical as a pair of speedos magazine. The in a snowstorm, says Alistair Weaver in The Sunday Times. ride is smooth and McLaren would like you to believe that its 570GT is different. supple, and the engine and The car is based on the 570S but for added practicality you now wind noise are muted. But once you get… a side-hinged rear window. This apparently transforms press the throttle, it will accelerate as quickly and effortlessly as the car from a self-indulgent toy into a versatile grand tourer. a supersonic travelator. From rest, 62mph is “eerily dispatched” Still, no one buys a supercar for practical reasons, and as a in just 3.4 seconds, and the top speed is 204mph. Corners are supercar, no other car in its price range is quite as “super”. It as much fun as the straights, thanks to phenomenal grip levels, has theatrical looks, a cockpit swathed in leather and carbon and the steering is a delight. This is one fibre, and the digital dashboard astoundingly quick car that handles will make you think you’re driving beautifully. You will struggle to get Kitt from the hit 1980s TV show these levels of pace, excitement and Knight Rider. It’s certainly the best sense of occasion anywhere else. car McLaren makes now – and it stands alongside the Ferrari 488GT Price: £154,000. Engine: 3,799cc as the best of the bunch. 32v twin-turbo petrol V8. Top speed: 204mph. 0-62mph: 3.4 It’s quite a civilised beast to drive, secs. Power: 562bhp at 7,500rpm. says Phil McNamara in Car Torque: 443lb ft at 5,000-6,500rpm.

Wine of the week: a dolcetto packed with fruit and energy

2013 Dolcetto di Diano d’Alba, Sorì Costa The Cascina Adelaide estate understands that Fiore, Cascina Adelaide, Piemonte, Italy the dolcetto grape is all about vibrant black-cherry fruit (£14.99, VirginWines.co.uk). and so it astutely leaves oak out of the equation. The estate also realises that most dolcettos are thin and While I am putting the finishing touches dilute – so, by contrast, it packs its Costa Fiore wine to my massive, inaugural Piemonte with fruit and energy. Report, which covers the two principal powerhouse wines of the region, This wine is at its peak now and it performs the Barolo and Barbaresco, I am conscious same sort of duties that elite cru Beaujolais or that I will only be featuring a handful old vine Bierzo (mencía from Spain) might do at of elite barberas and dolcettos in this your dinner table – serve it slightly chilled and it tome. While nebbiolo, the variety which will romance top charcuterie, terrines and pies, by Matthew Jukes gives longevity and majesty to both barbecue favourites and even mildly spicy Asian- Barolo and Barbaresco, is the local hero influenced dishes. grape and barbera a variety worthy of note, dolcetto, which drinks young, is always at the back of the queue. So let me ● Matthew Jukes is a winner of the International redress this balance this week with a triumphant example of Wine & Spirit Competition’s Communicator of the this underrated red grape. Year (MatthewJukes.com).

MONEYWEEK 24 June 2016 moneyweek.com blowing it 39

blowing it 39 The new young fogeys A couple of years ago what she thought. “We I wrote about Generation weren’t as boring as that,” Y, the young people born she said, “but perhaps the between 1980 and 2000 millenials are.” sometimes known as “Generation Yawn”. One Old Bond, new villains of them, Rachael Dove, “You must forgive me,” 24, confessed in The Daily James Bond tells Vesper Telegraph that she hardly Lynd in the novel Casino ever drank enough to get Royale, after informing a hangover and couldn’t her that Taittinger is remember the last time she the world’s greatest went clubbing or to bed champagne. “I take a after midnight during the ridiculous pleasure in week. Some of her friends what I eat and drink. It were going to knitting comes partly from being a classes. I quoted Professor bachelor, but mostly from Fiona Measham of Durham a habit of taking a lot of University: “The generation trouble over the details.” before Generation Y were bar-hopping, The world Bond is talking binge-drinking and taking about has gone, says the

cocaine. Now there is ©Getty Images left-wing journalist Paul a new sense of sobriety Generation Yawn: health-conscious, level-headed and conformist Mason in The Guardian, among young people.” and not only the class Cowley, a teenager in the 1980s, went to distinctions, “blurred forever by the To judge from Radio 4’s Analysis a sixth-form college in Harlow where, ‘mass luxury’ brand empires”. But Bond programme, things haven’t got any during his first A-level English lesson, one lives on – in films – so it’s time he took on better – or worse, depending on your of the students asked if he could smoke. new villains. Perhaps Spectre should now point of view. Jason Cowley, the editor Yes, said the teacher, a “bearded poet represent “the global oligarchy, ripping of the New Statesman, examined the manqué”. Five or six others promptly off the world” (overpaid CEOs, hedge- millennial generation (who overlap with lit up as well. Returning to Harlow, funders, fracking bosses, etc). Bond could Generation Y). He was struck by how Cowley found the students he met start “by having a quiet word with the socially responsible they are, these “new preoccupied with exams and getting jobs. man who tried to hike the price of HIV young fogeys”. The figures back him up. “They objected to being called boring,” drugs from $13.50 to $750, and then According to the Office for National Cowley wrote in The Times, but they are move on to the Saudi millionaires who Statistics, this could be the best-behaved certainly level-headed and realistic, if a have bankrolled violent jihadism”. And generation since the rebellions and little too conformist. “And they’re always the villains wouldn’t be that different: upheavals of the 1960s. More than a fiddling with their wretched smartphones the old Bond, after all, took on “greed- quarter of young adults in Britain today and oversharing the small details of inspired madmen” and “cat-stroking are teetotal; teenage pregnancy has fallen their lives.” sadists”. There are plenty still around. markedly; millenials smoke much less and take fewer drugs; the level of school At a Generation Y party on Saturday truancy is at a record low. I asked one of my daughters (born 1990)

Tabloid money... ”Or, or, or. Sir Philip Green’s actions have more ores than a Monaco brothel”

n So-called “body-shaming” advertisements are to be banned everybody talking to the Pensions Regulator ahead of the from London’s tube and bus network, reports the Daily Mail. BHS sale to the thrice-bankrupted Chappell. Or, or, or. Green’s The new mayor, Sadiq Khan, has announced a block on actions have more ores than a Monaco brothel.” advertisements that “demean” women or encourage them to conform to unrealistic shapes. The policy means controversial n “George Osborne’s Tory leadership hopes appear to be in marketing campaigns – such as Protein World’s “Are you beach ruins, whatever the outcome of the referendum,” says Ephraim body ready?” poster (pictured), which Hardcastle in the Daily Mail. “Did provoked a huge backlash last year – the lean and hungry look he adopted will no longer be allowed. under the tutelage of his £98,000 chief of staff Thea Rogers, 32 – including a n When quizzed about his new £48.8m Caesar haircut, a slimmer figure after plane, Sir Philip Green said: “I don’t a 5:2 diet and a Mockney accent – want to talk to you. Is that clear?” “I end up souring his previous friendly presume he doesn’t want to talk about character, making him seem shrill and his new £100m yacht either,” says hysterical? A rich man thanks to his Kelvin MacKenzie in The Sun. “Or family’s interior decorating business, how his missus owns all his assets he’ll never be short of money. Ex- in Monaco so he will never pay tax occupants of the Treasury have little on their disposal. Or how he stopped difficulty finding lucrative board jobs.” ©Rex Features

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Exponential Investor is published by MoneyWeek Research Limited. © 2016 MoneyWeek Research Ltd. Registered in England and Wales No 9539630. VAT No GB629 7287 94. Registered Offi ce: 8th Floor Friars Bridge Court, 41-45 Blackfriars Road, London SE1 8NZ. XX crossword

crossword 41

Tim Moorey’s Quick Crossword No. 799 Bridge by Andrew Robson A bottle of Taylor’s Late Bottled Vintage will be given Forcing or competitive? to the sender of the first correct solution opened on 6 July 2016. Answers to MoneyWeek’s Quick On this week’s deal, South intended his Three Heart bid as Crossword No. 799, 8th Floor, Friars Bridge Court, competitive (ie, non-invitational to game). However, North was 41-45 Blackfriars Road, London SE1 8NZ. not on the same wavelength and gave the matter not a second’s thought before raising to game. How would you play the Three Heart bid – I’d opt for competitive? Dealer North Neither side vulnerable AQ32 AK2 1063 753 109764 N J J5 W E 103 AKJ5 974 Q2 S AKJ10964 K85 Q98764 Q82 8 The bidding South West North East 1 NT 3 3 pass 4 pass pass pass West cashed the ace of diamonds at trick one, then, in response to his partner’s discouraging signal of the four, switched correctly to the queen of clubs. East overtook this with the king and the defence was 15 across was the first to reach the other unclued answers. poised to take two further tricks (assuming a second diamond lead from East). But at this point things went astray, East falling for the temptation ACROSS DOWN to try a second top club. 1/4 (5, 4) 2 Capital of Washington state (7) 9 Reddish brown; dark horse (3) 3 Formidable task (4, 5) Declarer ruffed the club but still appeared to be a trick short (with 10 Profitable (9) 5 Unfertilised 20 (3) spades not splitting evenly). However, West was in trouble on the run 12 A very high price (especially in 6 Kick out (5) of the trumps. As declarer led his last trump, West was forced to discard US) (3, 6) 7 Not a lot (1, 3) from king-knave of diamonds and four spades. Dummy, following 14 Kind of dance; spigot (3) 8 Go back into business (6) West’s discard, held two diamonds and four spades. 15 (5, 8) 11 Regular writer on a newspaper, 17 Quick swim; party say (9) preparation (3) 13 Competitors who finish second (7-2) If West discarded the knave of diamonds, declarer would simply give 19 Say again (9) 15 Very passionate; like a vindaloo up a trick to the king and so establish a third round winner in the suit. 21 Fried savoury dishes made with (3, 3) But when West discarded a spade, declarer was able to throw a 20 (9) 16 Surgical instrument (7) diamond from dummy and score four spade tricks. Ten tricks and game 23 Kind of iron; farm animal (3) 18 Where ships come in; ____ Morgan, made, leaving East to rue his failure to lead a second diamond. 24/25 (5, 4) TV personality (5) 20 Breakfast staple essential to 21 (4) For all Andrew’s books and flippers – including his booklet Duplicate 22 Cousin of an ostrich (3) Pairs Tactics – see AndrewRobson.co.uk. Tim Moorey is author of How To Crack Cryptic Crosswords, published by HarperCollins, and runs crossword workshops (TimMoorey.info). Sudoku 799 To complete MoneyWeek’s Sudoku, fill in the squares Taylor’s, a family firm for over Solutions to 797 68 7 in the grid so that every row 300 years, is dedicated to the Across 1 Knowhow 5 Odium 8 Actor 9 Sceptic 10 Strange 11 Large and column and each of the production of the highest 78 12 Fool’s paradise 15 Degas nine 3x3 squares contain all quality ports. Late Bottled 17 Embargo 20 Rhubarb 22 Theta 972 the digits from one to nine. Vintage is matured in 23 Ledge 24 Nanking. 4 789The answer to last week’s wood for four to six years. Down 1 Keats 2 Ontario 3 Heron puzzle is below. The ageing process 4 Wastepaper bin 5 (P)Ore 6 Inter 356 7 Machete 11 (P)Lea 12 Federal 213598674 produces a high-quality, 13 (P)Sis 14 Israeli 16 Glued 18 Baton 8215 459761823 immediately drinkable 19 Orang 21 (P)Ace. 789 wine with a long, No Parking (omission of letter P) 687423159 elegant finish; ruby red was given by KNOW, PAR and KING 56835219467 emboldened above. in colour, with a hint of 435 724635981 morello cherries on the The winner of MoneyWeek MoneyWeek is available to visually 961874235 nose, and cassis, plums Quick Crossword No. 797 is: impaired readers from RNIB National 142387596 and blackberry to taste. Stewart MacGlashan of Perthshire. Talking Newspapers and Magazines 396152748 Try it with goat’s cheese Answer to “Guess the price” column in audio or etext. For details, call 578946312 or a chocolate fondant. £325,000 Humberts 01823-288484. 0303-123 9999, or visit RNIB.org.uk. moneyweek.com 24 June 2016 MONEYWEEK lastword XX

42 last word We’re all God’s fools And we’re bound for the grave. No use looking sour about it!

about that figure. Is 2% better than, say, 1%? Or no inflation at all? It is myth. At last week’s Fed meeting, the prophet Janet brought forth the expected blah- blah to explain why they were still not ready to raise interest rates. Sticking her neck out, she said the Brexit vote this Bill Bonner week “could have consequences” for the financial system.

We’ve been wondering about myths Hey, what couldn’t? When you don’t lately. “Myths” are not necessarily want to do something, it’s not hard to untrue. They just can’t be known or find reasons not to do it. Don’t want to proven in the way, say, that Archimedes mow the lawn? The grass is too wet. Or could prove that the king’s crown was it’s too late in the day. Or the lawnmower made of gold. The Old Testament reports needs oil. Don’t want to take a chance on on God, for example, could be literally raising rates? The British could vote to

true, symbolically or metaphorically leave the European Union. The Orioles ©Rex Features true, or complete fantasy. Unless an angel could lose a home game. Or someone, How will the market react to a hyperactive Fed? speaks to you from a burning bush, you somewhere could catch a cold on his way can’t know for sure. to work. of more easy money. Not this time. Yellen backed off her previous Likewise, we can’t know for sure Rather than own up to the mess it has commitment to raise rates gradually and which candidate for president would be made, the Fed hides behind a myth – that instead strongly hinted that interest rates better. Poor Donald Trump is sinking it can protect the economy with centrally may stay depressed for a long time. in the polls; the media says his reckless planned interest rates. And now, thanks But instead of rising on the news, the comments are catching up with him. largely to its own mismanagement, the Dow registered its fifth straight day of But who knows? We can’t see into the world is deep in debt, with far too many decline. Who can take up the slack? future… only God can. So, we make people all over the world who earn far our decisions based not on facts, but on too little income to support it. Every loan “Amor fati” was Nietzsche’s expression. which myths (assumptions and prejudices comes with a fuse. And the world now It means “love of fate”. It is a white shoe that can’t be tested) we believe. has $200trn worth of debt… and plenty yearning for mud. It is a turkey looking of matches. Brexit is just one of them. forward to Thanksgiving. Or an investor In newspapers, elections, and most of Sooner or later, we’re going to see some stoically preparing for a bear market. public life, myths are more important fire and brimstone. We use the term to describe the grace than provable facts. They direct trillions and courage you need to meet a complex, of dollars of spending and set off wars Yellen pretends not to notice. What may unknowable, and uncontrollable future. in which millions are killed. Which be significant is the market’s reaction. We are all human… all God’s fools… brings us to the US Federal Reserve. The Until now, every time the Fed has dodged and all bound for the grave. No use going Fed says it wants 2% consumer price fate, investors bought stocks. They there with a sour look on your face! And inflation. But there is nothing scientific expected stocks to rise, in celebration no use pretending it isn’t so.

The bottom line

£340,000 The value of cannabis produced annually who is suing the producers behind the 2013 film The Wolf in 12 caravans at Glynmill traveller site in Merthyr of Wall Street, claiming he is behind the character of Nicky Tydfil, a camp that had received grants totalling £3.1m “Rugrat” Koskoff. Leonardo DiCaprio (pictured), who played between 2011 and 2014 from the Welsh government. Jordan Belfort in the lead role, has been ordered to testify.

£28m The estimated cost to the economy £46m The reported cost of Sir Philip Green’s new of closing the M1 for 28 hours after a Gulfstream G650ER private jet. Green recently faced 45-year-old man climbed onto the gantry MPs over his role in the demise of high-street chain over the motorway. BHS, which left a £571m hole in the pension fund.

157,000 The number of indebted $17bn The value of the treasure from a shipwreck Russians added to a list between January at the centre of a row between Colombia and and May that bans them from travelling American salvage firm Sea Search Armada, both of abroad, an 80% increase on the same period whom claim to have found it. The Spanish galleon the year before. A 2007 law prohibits those San José was sunk by the Royal Navy in 1708. who fail to pay debts exceeding 10,000 roubles (£110) from leaving the country. €60m How much Médecins Sans Frontières got in funding from the EU and Norway last year. The aid $15m The value of the reputational damage organisation has refused to accept any more money in claimed by former stock broker Andrew Greene, protest at the EU’s response to the refugee crisis.

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