MoneyWeek launched on 4 November 2000, not long after the dotcom boom had turned to bust. It may not have been the most auspicious time to launch an exciting new investment magazine, but our always slightly bearish tendencies helped us to thrive and 1,000 issues later we’re still going strong, thanks to our readers. Here are some of the most significant calls we made along the way – and how they turned out.
Buy gold (Sept 2002)
It wasn’t the first time we’d mentioned gold in a bullish light, but we looked at gold in detail and on the cover of our 96th issue. In her editor’s letter, written amid the depths of the post-dotcom crash gloom, Merryn noted that “in the face of dollar weakness and America’s fast-rising money supply, gold has begun to reclaim its natural position as a financial hedge in troubled times”. Gold was then trading at a mere $320 an ounce. The US dollar did indeed get a lot weaker (in fact, even though the dollar is generally viewed as strong today, it’s actually still lower than it was back then, as measured against a basket of its main trading partners). And the money supply has certainly risen dramatically, although I’m not sure anyone on the MoneyWeek team would have imagined we’d ever see today’s levels of money printing. As for gold, it didn’t really look back – while it is still below its peak dollar value (just over $1,900 in September 2011) it is currently trading at or near record highs in most other currencies, including sterling.
Buy oil (April 2004); Sell oil (August 2008)
Commodities have always been one of MoneyWeek’s main areas of interest and in April 2004, with the oil price sitting at around $30 a barrel – ironically, not that far from where it is now – Merryn made the argument that it was time to buy in. While prices were in fact high by historic standards, the “peak oil” thesis was moving from the fringe to the mainstream and as Merryn put it, was best summed up with the phrase: “the days of easy oil are over”. Oil would eventually hit a record of more than $140 a barrel (not long before we told you to sell in August 2008), which gave more than enough impetus for explorers to find new sources, such as shale. Of course, now that oil is back at $30 a barrel or so, we’ve seen the “peak oil demand” thesis (the idea that oil is going the way of the dinosaur – again) gain ground. Does that signal that we’re at another extreme? Most likely.
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The credit crunch (July 2007)
In September 2006, almost two years to the day before Lehman Brothers went bust, Cris Sholto Heaton wrote a beginner’s guide to credit derivatives in which he warned that “far from cutting risk, the spider web of derivatives could push it through the financial system, with losses in unexpected places”. By summer 2007, we were starting to find out exactly where those losses were appearing. American house prices were falling, subprime mortgages and collateralised debt obligations were regularly cropping up in the business pages and credit markets were getting twitchy. Then-Federal Reserve chairman Ben Bernanke might have been insisting that everything was okay, but we disagreed: “The cheap money boom is giving way to the credit crunch”. We suggested sticking with gold and cash and avoiding assets such as commercial property, although we remained keen on big oil and defensive blue-chips. Just a couple of months later, Northern Rock went bust.
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Sell the banks (March 2008)
When it came to wealth protection during the credit crunch, our regular contributor James Ferguson (now at MacroStrategy Partnership) had a fantastic run. In February 2008 he told readers to stay away from the Icelandic banks, despite the tempting 6%-plus interest rates on offer. “If it’s Icelandic, then be afraid; these banks are starting to be priced for bankruptcy risk and it’s not clear what protection UK savers might have with these foreign accounts.” In October 2008, the Icelandic banking sector collapsed and British savers who’d saved with them faced a long and fraught wait to get their money back.
Then in March, at a roundtable discussion, James warned on the rest of the banks, saying that “your default position should be that the banks will lose 80% of the value of their equity”. At that point, Royal Bank of Scotland was still trading at £2.85 per share and Lloyds stood at £2.23. And even then, the idea that it either could or would be nationalised was still outlandish. Yet if anything, James’s gloomy prediction was an understatement.
Buy Italy (June 2012)
In late 2009, what should have been one of the least systemically important economies in the world – that of Greece – triggered a financial crisis that dragged on through the headlines for what was literally years and what felt like decades. Greece’s massive public debt threatened to tear apart the eurozone by triggering a run on any other remotely vulnerable country’s government debt and by June 2012, sovereign bond yields across the eurozone were spiking and every day ended with another emergency summit. Yet, as a result of all this, eurozone stocks were undeniably cheap, with many trading below where they were even in the depths of the 2008 financial crisis. While we were a bit too nervous to bet the house on Greece, we did suggest that you buy into Italy, which was far too big to fail. A month later, European Central Bank boss Mario Draghi vowed to protect the euro and the market rallied nicely from there.
The death of buy-to-let (Sept 2015)
In early September 2015, James Ferguson (again) wrote about the end of the buy-to-let boom. Then-chancellor George Osborne had just started to reduce the tax advantages accruing to amateur landlords, which, as James pointed out, would make it easier for first-time buyers to compete with them for entry-level homes. “The chancellor’s tax changes will make it an increasingly level playing field for first-time buyers, who haven’t really had a look in over the last 15 years.” In terms of wider house prices, the tax changes also meant lower yields on investment properties, making them less attractive to buyers. “Now is not the time to start a career as an amateur landlord,” we noted – and anyone who has seen the relative stagnation in the UK property market (and in London – the buy-to-let hub – in particular) since then is probably glad that they didn’t.
Trump, Corbyn, and populism (Sept 2015)
On 11 September 2015, meanwhile, most pundits were still decrying the chances of Donald Trump ever becoming US president, while Jeremy Corbyn was still one day away from becoming leader of the Labour party. We warned readers that in fact, Trump and Corbyn were just the vanguards of a new political reality and that they’d better prepare their portfolios in accordance. We also pointed out that the political atmosphere meant that central banks would almost certainly end up printing vast sums of money come the next recession. Which, now that we’ve been hit by Covid-19, is of course exactly what’s happened.
Avoid Woodford (March 2018)
Our regular contributor Max King was never a fan of Neil Woodford’s Patient Capital Trust. In March 2017, when Woodford’s star as an independent was at its height and Patient Capital was still trading at more than 90p a share, he suggested that rival trust Syncona (then trading at around 150p) looked a better option. Then in March 2018, with Patient Capital looking a little rough around the edges, but still trading around the 75p mark, he reiterated his point, urging investors to get out. “Woodford appears to have thrown a lot of mud at the wall in the hope that some of it will stick rather than having made focused investments based on detailed, expert analysis... With a focused portfolio of illiquid, high-risk investments, imprudently financed with debt, Patient Capital’s shares could fall a lot further. It’s not too late to switch into Syncona.” It wasn’t. Patient Capital didn’t change much until Woodford’s wider empire hit the buffers in 2019 (see page 38), but then collapsed below 30p before being taken over by Schroders. As for Syncona? Even after the recent Covid-19 hit, it’s still trading just above £2 a share – even if you’d bought in March 2018, you’d still be just about even on the trade, a lot better than your outcome with Patient Capital.
We’ve had some shockers too
I’m not saying for a minute that we get everything right – far from it. Clangers have included a general tendency to be too sceptical about technology stocks (this probably reflects our fondness for value stocks and fascination with commodities). One suggestion that really makes us cringe now was our view that Google (now known as Alphabet) was overvalued at its initial public offering in 2004, at a whopping $85 a share (it now trades at roughly $1,350 a share, seeing as you ask). We’ve also been consistently too bearish on bonds as a result of our view on inflation – even now the bond bull market can’t be declared dead and gone, although I can’t say we’ve any plans to change our minds about the inflationary denouement soon.
However, I like to think that we’ve given you plenty of food for thought over the last near-20 years (that’s an anniversary we’ll be celebrating in November – look out for our plans for that) and that as well as guiding you through big catastrophes such as 2008 and our current crisis, we’ve helped our readers to avoid the more pernicious aspects of the financial industry, such as high fees, chronic underperformance and dodgy investment vehicles. Here’s to another 1,000 issues – may all your investments be profitable ones.
