The future's good. Very good or so says Warren Buffett. In this week's issue,we look at his latest letter to his investors. In it he says much what he always says that America is great; that human ingenuity and capitalism make anything possible; and that anyone who buys and holds "conservatively financed" US stocks will "almost certainly do well".
We aren't so sure. Might it be that Buffett is looking backwards a little too much? His own career has spanned a period of fast-moving globalisation that has given tremendous freedom and extraordinary growth opportunities to America's big firms (and everyone else's for that matter). But if Buffett was starting his career today, would things be moving in the same happy direction?
Jonathan Compton doesn't think so. He explains the danger Buffett isn't seeing: a "bombastic, introspective and nationalistic" trend in Western politics that could easily lead us to a 1930s-style collapse in world trade. Your immediate thought will be that Compton is worried about Donald Trump. Not so.
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As he notes, politicians all over the world are calling for much the same things as Trump (tighter control over everything from mergers and acquisitions to the tax status of multinationals) and the trend that is producing is already clear in the numbers: since 2008 the G20 nations have between them introduced 1,583 new trade-restrictive measures and removed only 387. The future could be less good than Buffett thinks.
We always tell you to invest with as much of a margin of safety as possible. That's particularly important at the moment. Turn to our cover story and you will see why that means not going anywhere near the upcoming initial public offering of Snap. We also look at why it could mean investing in small companies in France (yes, really!). After all, as Andrew Van Sickle points out, valuations across Europe remain reasonable, but when it comes to small caps, they are "extremely cheap".
You might also look to our chart of the week for an idea. We've been suggesting Russia for some time on the basis that it is too cheap. I suspect that those of you who got in early will want to take some profits. But you should also note that, despite the huge gains of the last year, it is still very cheap. I would hang on to a small stake.
David Stevenson looks at a less nerve-wracking investment Alliance Trust. The Dundee-based investment trust has had a trying few years underperforming assets, overpaid management and stroppy activists. But David reckons (as I think I do see my blog on the matter) that it has given itself "an impressive reboot" and that it is turning into a reasonable one-stop asset-allocation shop. Finally, remember that you are going to end up with duds in your portfolio (however safe they look on day one). What do you do with them? John Stepek answers that one in this week's issue.
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Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
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How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
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Don't be scared by economic forecastingEditor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
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The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
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The wolf returns to the eurozone’s doorEditor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
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Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
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Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
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Why we need to get a grip on our governmentEditor's letter Our government is trying to do too much, enacting policies that are destructive to the private sector. It needs to drop the the feel-good nonsense and create policies that lead to long-term wealth, says Merryn Somerset Webb.
