What caught my eye this week.
I noticed UK commercial property giant Landsec posted decent first-half results this week.
CEO Mark Allan reckons:
“…property values have stabilised, with growth in rental values driving a modest increase in capital values, resulting in a positive total return on equity.
We expect these trends to persist, as customer demand for our best-in-class space remains robust and investment market activity has started to pick up.”
After four miserable years, things might be looking up for the owners of offices and retail parks.
Is this because fewer people are still working from home, new office supply has cratered, interest rates have stopped going up, or enough of the weaker players have thrown in the towel?
All of the above, I imagine.
But Landsec (ticker: LAND) shares still trade at a 30% discount to net assets, even as those asset values have stabilised. In other words it’s early days and the market is yet to be convinced.
What normally happens next is economic growth reaccelerates, office space tightens, increasingly marginal offices are built, discounts narrow and eventually maybe even turn to a premium, chubby guys in hard hats appear in the Sunday papers touted as ‘the new builders of Britain’, bank lending gets sloppy as the good years roll on, euphoria is misidentified as robust business confidence, and only when a shock finally hits us and the music stops do we discover who borrowed too much.
It could be different this time. Maybe because of WFH. Maybe because of AI. Perhaps self-driving cars will rewrite geography.
It usually feels like something special is going on that could change the game.
Mostly though – big picture – it doesn’t.
The political big dipper
You see the same thing playing out in the wider economy – and more viscerally in this year’s politics.
In the Financial Times John Burn-Murdoch notes how voters globally have punished whoever is in power:
Like everyone and his dog I have my theories about why Trump won the presidency and the Tories lost. There’s a bull market in competing explanations.
The US result is especially perplexing – even terrifying – given how confused voters seem to have been.
In an excellent review of why Trump triumphed, Kyla Scanlon reminds us:
People think that violent crime rates are at all-time highs, that inflation has still skyrocketed, that the market is at all-time lows, and that unauthorised border crossings are at all-time highs.
None of those are true – it’s all the opposite. But those misinformed views informed how people voted.
In blind polling Republicans actually preferred the policies of Kamala Harris! Yet one narrative gaining traction among a certain ilk of terminally online ‘bros’ is that this election saw voters ‘liberated’ from the ‘gatekeepers’ of ‘mainstream media’.
That’s true in as much as many voters believed – and voted on the back of – unrealities that fitted their priors.
Bring back the media gatekeepers, I say.
Tracing the source
Given the universal slap in the face of incumbent parties though, we might do better to look for the global driver of voter unrest, rather than gaze too closely at the minutia of America’s psychodrama.
Inflation must be the culprit. People hate it, and they felt it everywhere.
Partly because global supply chain disruption is – doh – global. But also because everyone suffered through the same pandemic.
For various reasons – natural and mandated – economies cratered in 2020 due to Covid. Many businesses were at risk of going bust, and households of going bankrupt.
People seem to have already forgotten this graph:
Mass unemployment faced the authorities that grim spring. In response they deployed vast support packages and/or stimulus and paid citizens to stay at home. Easier money kept firms on life support.
It worked to prevent a slump. But one way or another – and aided by Russia’s invasion of Ukraine – it eventually gave us inflation a couple of years later, and then higher interest rates to knock the inflation back.
It’s perplexed onlookers that despite a peerlessly strong US economy with record low unemployment and a soaring stock market, voters complained of living through economically awful times.
Few of them now seem to recall those job losses – far less think about the counterfactual of a depression if nothing had been done.
They see much higher prices, feel poorer (despite higher wages in most cases), and rage.
What have you done for me lately
Would they have preferred high unemployment to high inflation?
The trade-off would never have been so simple. But yes, I think many secretly would have.
For most people, unemployment happens to the other guy. In contrast we all feel the pain of inflation.
For now at least the cycle has turned again, and inflation is subdued.
True, swingeing tariffs in the US might upset that soon. But until then, every day people get a little more used to prices at these levels, and they begin to forget what they were so cross about.
Why are interest rates so high anyway, they ask.
Inflation is low. Don’t these central bankers know ANYTHING?
Master market
For those of us who breath the markets, these cycles turn at double-speed. Wheels within wheels.
The markets are like a nervous cabin boy, dashing about a ship that’s steadily forging through the surf.
The ship makes its stately way, over time passing through fine waters, choppy seas, storms, and worse.
But the cabin boy lives out all of those scenarios many times every day in his head.
He sees cyclones from every mast, yelps at the slightest swell, and yet he also wants to break out the rum for a party the moment the sun shines.
Every day is an adventure ride of ups and downs! With enough time however even the stock market’s scatterbrained progress looks inevitable.
Take a moment to remember all the drama of the past five years. Then look at this graph:
Golden years
The funny thing is I didn’t start this ramble to reinforce that equities eventually go up: don’t worry, be happy.
In fact I was going to highlight the latest data on how US equity valuations are getting into rarified air – truly Dot Com Bubble-type multiples.
But like everyone else we’ve been saying similar all year. The US market has climbed on anyway. Even the Trump Bump seems nothing special on that graph above.
I know it’s hard to imagine US stocks not being the only game in town. So it might be an instructive to read this Sherwood article about how gold has actually beaten US equities since the late 1990s.
According to Deutsche Bank data:
The asset of the new millennium has been gold, delivering a real return of 6.8% per year since the end of 1999 despite being a shiny rock that generates no earnings and pays no dividends.
So far, the S&P 500 has averaged total [real] returns of 4.9% over this stretch.
Incredible, no?
So bad were returns from US stocks between 2000 and 2010 that the almighty bull market that began in the rubble of the financial crisis has still barely lifted returns back into ‘adequate’ range.
And US tech in 2010? You could hardly give it away.
Life beyond AI
To return to where I started (thematically on-point, eh) Landsec shares actually fell on its reasonable results.
Because of course they did. Landsec is a forgotten share in a discarded sector that trades on the still mostly-unloved UK stock market.
But it probably won’t always be this way.
Okay – perhaps AI really is ‘all that’, as an ex of mine from the North used to say.
If ChatGPT 2030 can do all our jobs, then presumably we won’t need Landsec’s offices. Nor will most people have money to buy drinks from Diageo (ticker: DGE) or even to buy the houses they browse on Rightmove (ticker: RMV).
Sometimes things really do change. I started including an AI section in the links years ago – before most people had heard of LLMs and all the rest – because of this potential. AI is important because there’s a small chance of something truly seismic, existential even, for humanity.
But there’s no certainty.
Indeed it’s surely more likely that AI is overhyped, that the biggest US tech firms will invest hundreds of billions just to destroy their margins, the US market will accordingly falter, and something else will get a turn on the merry-go-round.
Maybe even boring British shares. After all they’re mostly cheap, pumping out cash, buying back their own stock – and yeah, many could hardly grow more slowly, so the only way is up…
Who knows? Perhaps they’ll be helped along by a global economy that finally forgets the pandemic and frets less about inflation, gets used to interest rates of 4-5% again, and at last goes back to normal.
For a while, at least. Until we go through the wringer again…
Have a great weekend.
From Monevator
Why a global ETF is delisting from the LSE – Monevator
Are building societies still a good place for your money? – Monevator
From the archive-ator: Family investment companies – Monevator
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Reeves touts pension shake-up to boost economic growth… – BBC
…and as the economy stalls, something better had… – BBC
…but will scale solve the UK’s pension investment problem? [Search result] – FT
Squeeze on rental supply set to push up costs for tenants – RICS
Number of ISA millionaires soars; top 25 hold £8.9m on average – T.I.M.
Retirees may need to pay tax on their state pension from 2027 – Which
Homebase enters administration with 2,000 jobs at risk – BBC
Klarna chooses New York over London for much-anticipated IPO – Guardian
Court: mini-bond firm London & Capital was a Ponzi scheme – This Is Money
Republican voters suddenly feel good about the US economy – Axios
2022 was weird: why 60/40 portfolios are working again [US but relevant] – Morningstar
Products and services
Mortgage rates below 4% disappear as rate cut expectations ease – This Is Money
Why ‘sustainable’ is being dropped from investment fund names – Which
Get up to £1,500 cashback when you transfer your cash and/or investments to Charles Stanley. Terms apply – Charles Stanley
Do you need inheritance tax insurance? [Search result] – FT
Amazon Haul is an attempt to take on Shein and Temu – CNBC
Open an account with low-cost platform InvestEngine via our link and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
Are premium cashback and reward cards worth the annual fee? – Which
New cheapest energy deal from EDF could save households £109 – This is Money
Homes for sale in converted buildings, in pictures – Guardian
Comment and opinion
John Reckenthaler: So long, and thanks for all the gains – Morningstar
Don’t worry about what the market is telling you – Behavioural Investment
The US stock market gains 30% in a year more often than you’d think – A.W.O.C.S.
Advice for the kids – Humble Dollar
How to find genuinely good Black Friday deals – Guardian
Time isn’t an asset class – A Teachable Moment
Redefining the terms – Money with Katie
A rant about (a lack of) evidence-based investing – Klement on Investing
Beyond your career – Humans vs Retirement
Naughty corner: Active antics
The disappearing ‘index effect’ – Alpha Architect
Private market pitfalls: IRR does not equal rate of return – CFA Institute
Crypt-o-crypto
What Trump 2.0 really means for the crypto industry – Sherwood
HMRC and crypto capital gains – This Is Money
MicroStrategy acquires another 27,200 bitcoin for $2bn… – The Block
…and it plans to issue $21bn in stock to buy more – FT
Kindle book bargains
I Will Teach You To Be Rich by Ramit Sethi – £0.99 on Kindle
Eat That Frog! Get More of the Important Things Done by Brian Tracy – £0.99 on Kindle
Growth: A Reckoning by Daniel Susskind – £0.99 on Kindle
A Confederacy of Dunces by John Kennedy Toole [A fav, not about money] – £0.99 on Kindle
Environmental factors
Regime of Unreason dawns in the US – Cold Eye Earth
What you can do – Humble Dollar
Quite parched: global demand for desalination is soaring… – Sherwood
…and what a difference cheap water could make – Unchartered Territories
He’ll try, but Trump can’t stop the clean energy revolution – The Grist
What backlash, anyway? Few ESG investors are divesting – Klement on Investing
Scientists just discovered a coral the size of two basketball courts – Vox
Robot overlord roundup
Lessons from 130 hours in self-driving Waymos – Matt Bell
The deep learning boom caught almost everyone by surprise – Understanding AI
Practical AI: Magic draft style [A few weeks old] – Echo Beach
Ex-ing X etc mini-special
The Guardian has quit X, citing ‘disturbing content’… – Guardian
…but does traditional media just hate what the Internet represents? – Hot Takes
BlueSky got one million sign-ups in a week – Engadget
How to migrate to BlueSky – Fast Company [Here’s us. Nothing doing yet]
Satire site The Onion buys Infowars out of bankruptcy – NBC
“How I escaped the alt-right pipeline” [Video] – YouTube
Off our beat
Are love songs over? [Interactive thingie] – The Pudding
Why some coffee shops are charging remote workers on laptops – Sherwood
China’s monster espionage campaigns – Freethink [h/t Abnormal Returns]
Favourite remote spots in Europe – Guardian
The rise of Nicole Kidman, pop culture folk hero – Stat Significant
‘Middlebrow’ doesn’t mean bad – Vox
Don’t dumb down – Seth Godin
And finally…
“As G. K. Chesterton put it: ‘To be clever enough to get all that money, one must be stupid enough to want it.’”
– Andrew Wilkinson, Never Enough: From Barista to Billionaire
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Thanks for posting early – interesting set of links to while away the hours till it gets light!
Regarding that Kyla Scanlon quote. Obviously being a brit I don’t have too much idea whats going on in the states but if it’s anything like here I’d hesitate to believe it. Remember that statistics can be manipulated. Is violent crime and crime in general at record lows? Is the us experiencing deflation? Or has the period of the current administration seen massive inflation under their tenure? Is the stock market at record high, if so how often does this occur during a 4 year political cycle? Have border crossings lowered recently due to the administration changing policies with an upcoming election? And/or the worry of future deportation under a Trump presidency. What is the total amount of (known/measured ie encounteted) illegal migrants who have crossed the border during the biden administration?
Gen AI enables junior staff to turn a few of bullet points into a complex and lengthy report for their managers to consume, who in turn prompt Gen AI to summarise the report into a couple of sentences. Both groups feel very clever while not questioning the value of the interaction in the first place.
Good to see you on BlueSky. I’m re-posting all my Twitter stuff over there and so far my feed is a much happier and less spam-saturated place.
@Jim US inflation as measured by the government (aka. CPI) does not reflect people’s experience of inflation, because it excludes financing costs (mortgages, loans, etc.). Apparently Americans are so used to debt they don’t measure inflation in prices, but in instalment sizes…
Matt Stoller explains it better https://www.thebignewsletter.com/i/136785351/sticker-price-versus-reality
The fact that many in the US seem to believe that they are actually badly off really beggars belief. It really shows the impact of misinformation on social media, and how soft-brained so many are, that they can believe that they are badly off. Some are so dumb they think Trump will protect democracy!
Yes, there was a pulse of high inflation but that was caused by the combination of a massive supply side shock combined with a massive fiscal impulse. Trump and Biden together transferred over US$ 2 trillion from the public to private sector. Putting that amount of cash directly in people’s bank accounts was always going to create sizeable consumer demand once the COVID lockdowns had passed.
The idea that this was anymore Biden’s fault than Trump is really somewhat bizarre. He just happened to be in the seat at the time when it came through. Moreover, given that Trump is likely to fiscally expand just as much, or even more, added to inflationary tariffs, I don’t see how anyone could vote for him based on the idea he will help with the cost of living. His policies are clearly inflati0nary. Globalisation was a core reason for the disinflation process of the last 30 years or so. Protectionism reverses that.
@pikolo I’m sure thats a factor too. Id still be interested to see the price of basics, loaf of bread, eggs, milk, fuel etc. I’d like to see the prices of these from beginning to end of trump1 term and likewise for biden term. Maybe ill be surprised and the bulk of inflation happened at end of trump1 with covid?
Its like with crime here, they can claim any stats they want because the public is so disheartened with the police they dont call unless they are actively being murdered. Aren’t shops instructed not to call for less than 50 quid of shoplifting? Any rational person can see society is probably the worst it has ever been certainly in my short lifetime.
Edit. Also just seen the above post and I’d agree. Some things will happen no matter who is in the hot seat. Its just the commentary when people try to flip the narrative which annoys me. As Musk says, make orwell fiction again!
“gold has actually beaten US equities since the late 1990s.”
Heh, heh. But now that everyone knows I’d better sell and take the other side of the bet. Do inverse-gold ETFs exist? If so could they be held in ISAs? If not, in SIPPs?
“In blind polling Republicans actually preferred the policies of Kamala Harris!” Kamala had policies? Did you ever? Maybe she should have stopped cackling and explained what those policies were.
Anyway much of such discussion is just needless. There’s an obvious pattern in US presidential voting over the years. The electorate blames all current economic problems on the current President. Bugger time lags! Bugger checks and balances! Bugger separation of powers! The ass in office gets the blame. And you can’t get an assier ass than Joe Biden. The only interesting feature this time was that Kamala was presumably seen as no improvement over the Vegetable.
@Jim #2 and 7: there are lies, damn lies and statistics as Twain would say. People voted based on the evidence of their pay cheques, the grocery bill, and yes, their preferred echo chambers. A meme about the price of eggs having swung the election is making the rounds on Reddit… all of this is rational, if not very reassuring.
@Jim(#7):
This post from Ken Steiner might be of some interest to you: https://howmuchcaniaffordtospendinretirement.blogspot.com/2024/10/are-you-financially-better-off-today.html
Also, if you want the SS increases from earlier years than those Ken considered (e.g. during T#1) these are all available at: https://www.aarp.org/retirement/social-security/info-2020/colas-history.html and NOTE that this site gives the increase as being for the year they are largely paid during; rather than as of Dec of the year awarded – which Ken uses.
It’s interesting to note you saying that everyone hates inflation, given that I’d say there’s a sizeable minority of people for whom inflation has been rather good. I’m thinking of those, generally younger, homeowners who are relatively underweight on pensions and savings, but overweight on mortgages. As you say, for many people, wages have pretty much kept up with inflation, which nullifies the price rises of day to day spending; in which case the erosion of debt will be the bigger net impact than the erosion of assets. I wonder how many of these people still hate inflation.
One danger I don’t think I’ve seen mentioned is that it’s a damn sight easier to successfully solve fictional problems than real ones! Trump can look like he’s improved the economy, reduced illegal immigration etc simply by reducing disinformation a little bit- bingo!
Unfortunately the UK’s productivity and slow growth can’t be solved so easily- and I don’t think forced misallocation of pension funds is going to be a silver bullet….
“It’s perplexed onlookers that despite a peerlessly strong US economy with record low unemployment and a soaring stock market, voters complained of living through economically awful times.”
For every perplexed onlooker there are three people who are adamant that they are unhappy that their standard of living worsened under Biden – day to day spending power. That was the first exit poll on the night of the election, which was an early indicator that there would be a big swing away from the democrats – not so much that Trump was a perfect saviour, but he understood the huge public struggle.
Anyone who has been to the states teh apst few years and talked to regular Americans were not surprised.
That the democrats are still navel gazing and don’t get it, is worrying for them.
Surely the Dems are just the sort of people who should rate “lived experience” over statistical abstractions. Especially since some of them probably know how the abstractions were doctored. Did they really believe their own propaganda?
Come to think of it, why would anyone believe the sort of Dem apparatchiks who until late June were swearing that Joe Biden was “sharp as a tack”?
Both links in the ‘naughty active section’ appear to go to the second article just fyi
Great to see Monevator on BlueSky, a place where it seems sensible adults inhabit.
I agree that markets are cyclical, we see the same phenomenon repeat each generation. But most people will say you can’t time those cycles, so just stay invested for the long run.
Whilst I agree in being invested for the long run, the assets you choose can have a massive impact on your investing outcomes. Obvious stuff. You want to get out of the thing that is about to experience a secular bear market and ideally jump to the unloved assets class before it flies.
US government bonds have just ended their 35 year bull market. Whilst it was difficult to time the point at which the bull market ended, it was clear that the lower for longer narrative re yields was fully entrenched and investors were complacent when it came to the risks. Knowing about the long term bond cycle would have helped many investors.
The 18 year property cycle is about to top in 2025/26. If you are aware of this then what would you do differently? I sold my BTL property which I’ve opened for 18 years in August and I would like to sell my main residence next year. It’s incredibly difficult to sell property in a bear market without slashing the price, best to sell as we head into the peak.
The 17.6 year stock market cycle, my favourite, you can see from the all share chart above that the 2022-24 bear market that the cycle predicted was bang on. The next point of trouble is 2029 which line up with the end of the Trump presidency. The top of the secular cycle is 2035. I’m 100% invested in equities awaiting the end of the secular cycle.
There are commodity cycles that I am less familiar with and many more. My point is you can be adrift in the sea and let market forces dictate your returns or you can do some research and be more aware of the risks (E.g bonds are more risky now that benign inflation is in the past).
What I’ve learnt is that investing is gambling to most people in Britain, technical analysis is voodoo to those who invest based in fundamentals and cycles analysis is voodoo to technical analysts. But there are a small group of individuals who trade cycles and make outsized returns. It isn’t easy, there’s no clockwork precision, but once you see it you can’t unsee it.
Kerry
Re # 7 “Any rational person can see society is probably the worst it has ever been certainly in my short lifetime.”
This is utter nonsense, if not dangerous misinformation.
I’m pretty sure most of America’s political problems emanate from the large levels of inequality, something the incoming party has very little interest in fixing.