We have turned to the state to protect us in a most extraordinary way, note John Micklethwait and Adrian Wooldridge in their latest book, The Wake Up Call. We have given up “our most cherished liberties”, including the right to leave our own homes. Terrified on the one hand of death, and on the other, economic ruin, we have allowed the state to regulate – and finance – our every move.
This could have been nice for those who went into politics to control others: the whole thing has made them very important and very powerful. The problem is that it has also revealed they aren’t very good at using said power. In the UK, it seems we have a substandard health service; an inadequate bureaucracy; and a decision-making system that is both too centralised and too localised. Our government has been growing bigger for years. It has most definitely not been growing better (something Dominic Cummings has long been pointing out). Perhaps we might end this crisis thinking about how to do less, but better, rather than continuing the long-term trend of doing more, and worse?
That said, the UK state is hardly alone in this dismal performance (acting too slowly, then too heavy-handedly, behaving as though the science on the prevention of new viral pandemics can be settled in a matter of months, failing to test, messing up equipment orders, etc). Most European countries have poor records too. By mid-year, even Germany “had a mortality rate that was roughly 20 times as high as South Korea’s and Japan’s”. Almost no one comes out looking good.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Given all this, while it is fair to price a degree of government incompetence into the UK stockmarket, things may have gone too far. UK equities have underperformed both the US and Europe this year, and have lagged the MSCI World Index by 43% since 2000. The FTSE All Share is on a price/earnings ratio of about 17.5 and the FTSE 250 on 15.1. The US is on 27 and most European markets are over 20. If the UK market were a fund, says William Dinning of Waverton Investment Management, “it would have been closed down or merged with another by now”.
It’s not just about Covid of course. There’s Brexit (which we remain convinced too many people are irrationally gloomy about); the fall in dividend payouts; and the perception that we are low on high-growth and tech stocks. So what, bar a vaccine, might be a catalyst for change? A trade deal with the EU would cheer a lot of investors up fast (possibly not just in the UK). Failing that, so might the start of next year: the waiting is likely to prove to have been much more worrying than the event itself. Clarity over dividends might help – many companies have already reinstated them or indicated that they plan to, but the removal of all restrictions would be good – as might a realisation that some of our unfashionable big companies are still capable of making real money. The analysts at Stifel like Fidelity Special Values and Edinburgh Investment Trust. On page 26 Max looks at his favourite smaller company trusts – with plenty of growth, plenty of tech, plenty of value and crucially, plenty of good management.
PS, MoneyWeek is almost 20 – we need your help to celebrate! See here for more.
-
Barclays warns of significant rise in social media investment scamsInvestment scam victims are losing an average £14k, with 61% of those falling for one over social media. Here's how to spot one and keep your money safe
-
Over a thousand savings accounts now offer inflation-busting rates – how long will they stick around?The rate of UK inflation slowed again in March, boosting the opportunity for savers to earn real returns on cash in the bank. But you will need to act fast to secure the best deals.
-
Should your business invest in a VoIP phone service?Here's what you need to know about VOIP (voice over IP) services before landlines go digital in 2025.
-
The end of China’s boomLike the US, China too got fat on fake money. Now, China's doom is not far away.
-
What is the future of Royal Mail in the UK?With fewer of us sending letters and parcels, the Royal Mail is finding dealing with the nation’s post is an increasingly unprofitable and costly business.
-
What's the secret of Manolo Blahnik's success?Fashion maestro Manolo Blahnik shows little sign of slowing down at 81, and his company notched up a record financial year in 2022. What is the secret of his success?
-
Michelle Mone's "tough year of pain"Michelle Mone liked to portray herself as a working-class heroine who worked her way to the top through grit and determination. But her pedestal is built on sand.
-
Trevor Milton, the Elon Musk wannabe, is jailed for fraudThe former CEO of Nikola, Trevor Milton, has been found guilty of lying about the development of the company's electric trucks.
-
Directors should think twice before waiving limited liabilityShould small-business directors ever provide a personal guarantee in return for bank finance?
-
Why Russia's economy is doing better than predictedSanctions were supposed to strangle Russia’s economy, but it seems to be thriving. What’s going on?
