Other people are finally coming around to our way of thinking
We try to be early to ideas at MoneyWeek; often too early. But this has been a week in which other people seem to be coming around to our way of thinking.
We try to be early to ideas at MoneyWeek. We are often rather too early. But this has been a week in which other people seem to be coming around to our way of thinking. First, housing. On the BBC this week, Nigel Wilson, chief executive of Legal & General (which has a large housing division), announced that help-to-buy has distorted the UK housing market. It is, he says, "a very unfair solution" that has done little but "help push up house prices". We've been saying this for years but when even housing bosses are saying so, surely it's time to call a speedy halt to the scheme (particularly now house prices have stopped rising).
Next up, interest rates. In The Times, Andrew Sentance writes that super-low interest rates are now "hampering rather than helping" the UK economy. They weaken the pound, they damage productivity, they punish savers, raise long-term inflation risks (see this week's cover story for more on how to react to this), and they cause divisive asset-price bubbles. All bad. We've been saying this for years. But when one of the men who was on the Monetary Policy Committee (MPC) when rates were first slashed to these levels (something he approved of) says it's time to raise them, perhaps the current MPC should pay some attention to him (or more attention than they seem to be paying to us at least).
The third idea gaining some traction is that the UK stockmarket represents excellent value for long-term investors. A trawl through my inbox shows we are no longer outliers here. UBS has a report out called "Is it time to buy the UK Domestics?" Answer: probably.
The FTSE 100 might have hit a new high, but not only has the UK been one of the worst-performing developed markets over the last two years, but our "domestically exposed stocks have underperformed those with international exposure by 51% since the Brexit referendum". The result? The price/earnings ratio of the domestics relative to that of the internationals is now at a "decade low", something that suggests there "is value in this part of the market". Indeed, there is. You should pick some of it up.
Finally, there is Italy. John Stepek and I have been pointing out for years (as have many other EU watchers recent events, as US strategist Ed Yardeni points out, are more of a "grey swan" than a black swan) that Italy is the real danger to the euro (and possibly to the EU in its current form). There is more on this in the magazine this week, and if you want a fast, simple and excellent explanation of what's going on you should also look at John's Money Morning on the matter. However, the key phrase uttered so far is this, from Italy's central bank chief, Ignazio Visco: "We must never forget that we are only ever a few short steps away from the very serious risk of losing the irreplaceable asset of trust," he says. If by "we" he means the various elites of Europe, we are afraid that his warning may be coming a little too late.