What caught my eye this week.
Our piece on the potential for a rise in capital gains tax [1] (CGT) kicked off a great discussion. We’re at nearly 100 comments now, almost all thoughtful and articulate. Check them out [2].
Plenty of you voted in our poll, too. Here are the results:
[3]
It’s good to hear 40% of Monevator readers have no CGT-chargeable gains to worry about.
(Hopefully that’s because you’ve been using ISAs [4] and SIPPs [5] – not because you’ve no investments and you only read Monevator out of a morbid masochism!)
It’s also no surprise that so few people are thinking about emigrating to escape a potential CGT hike.
However perhaps more than you’d expect are selling positions ahead of what’s still only a rumour.
I can see a case for it, though. Not only because any changes to CGT will probably come into force before Rachel Reeves has even finished her bedtime cocoa for the day, but also because it’s hard to imagine lower CGT rates anytime soon, even if they don’t go up in 2024.
If you’re sitting on gains that you’ve hitherto failed to defuse [6] – and you see little prospect of doing so now, given the already dramatically-lowered annual CGT allowance – then maybe it is rational to sell up, take your tax lumps, and reinvest into something else?
Preferably within an ISA or SIPP this time, obviously.
Yes it’s usually better to delay taxes savaging your returns [7] for as long as possible, all things being equal.
But long-term demographics and the UK state’s finances suggest today’s status quo won’t endure indefinitely – even if CGT rates do get through October unscathed.
Under the weather
Perhaps it’s all part of Rachel Reeves’ cunning plan? To scare us into paying more capital gains tax before she speaks, only to leave things as they stand on Budget Day.
If so that would be a textbook case of winning the battle but flunking the war.
We don’t need any more political gamesmanship, nor obstructive and punitive taxes if we can help it.
Rather, what we need after almost a decade of foot-targeting self-harm and knee-jerk populism is joined-up thinking that encourages for long-term growth.
And a just-released report – The Capital Markets of Tomorrow [8] [PDF] – has some ideas on that.
Get past the report’s strangely 1970s-style cover art, and inside you’ll find the thoughts of various City Grandees recruited back in 2022 to look into what ails UK growth, productivity, and the London Stock Market.
Make no mistake, as we’ve said many times there is a problem. Ignore jingoistic pundits who accuse those of us who say so of just talking the country down.
It might feel like the UK has been a sick man forever. But Britain’s relative decline – at least post-WW2 – only really began 15 years or so ago.
For most of the post-War period the report claims we kept up even with the mighty United States.
Take me back to dear old Blighty
The report says that from the mid-1950s up until the Global Financial Crisis, UK and US growth metrics across real wages, productivity, and real GDP per capital were similar.
Moreover, between 1955 and 2005 it puts the UK real equity average return [9] at 6.6% – slightly outperforming even the US’s 6.2%.
Unfortunately:
…since the Global Financial Crash (GFC), between 2010-23, the USA has delivered 8.4% and the UK only 2.2%, a significant and possibly ’embedded’ outperformance. […]
ONS data demonstrates how poorly the U.K. economy has performed since the GFC.
There has been no growth in real wages or real GDP per capita and small growth in productivity.
As the TUC and several academics have commented, average wages in the UK would have been £10,000 per annum higher if they had matched their performance prior to the GFC.
ONS data also shows that real GDP per capita was £27,218 in 2007 and £27,819 sixteen years later in 2023, so no annual growth. In Q1 2024 it was £6,903 compared to £6,850 in Q1 of 2007, again no growth. Productivity is only around 5% higher in 2023/4 than it was in 2007, much lower than the pre GFC trend growth of around 1.5% per annum.
This poor performance was against the background of Government debt increasing from £1 trillion in 2010 to £2.7 trillion in 2023/4, i.e. 100% of GDP, which is also £2.7 trillion.
Given the UK’s prior credible performance then, the last 15-20 years do look more like an aberration than our natural state of being – although of course we have recently had a meaningful structural change with Brexit that’s still playing out, for good (ahem…) or ill.
For their part the grandees are optimistic. They believe the UK can revert to ‘its pre-existing parity’. But they reckon it’ll require £100bn a year of capital inflows to achieve this.
And not just into the capital markets either, but also infrastructure such as water, transport and housing.
Their ideas concerning our pointy-end of the issue include scrapping stamp duty on UK share trades and encouraging or even mandating pensions to invest a minimum amount into UK private business.
The report also notes the UK has 20-30 high-quality unlisted growth companies worth tens of billions.
These unicorns could help revitalise the UK stock market were they all to float in London.
London calling
By the way, if you’re wondering what a capitalist revitalisation of the UK would look like if represented on a flyer created by a student activist from the 1970s channelling The Good Life [10], then The Capital Markets of Tomorrow has you covered:
[11]
My cynicism aside, it’s refreshing to hear the case made for capitalism, investment, and the UK economic engine firing together, and all without anyone wrapping themselves in the flag.
This report [8] won’t change the world, or even our corner of it. But hopefully it will get more of us thinking.
Have a great weekend!
From Monevator
Better than buy-to-let – Monevator [12] [Mogul members [13]]
Are you selling ahead of a capital gains tax rise? – Monevator [1]
From the archive-ator: Back-up plans for living off a portfolio – Monevator [14]
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.
Record level of former rental homes up for sale, says Rightmove – This Is Money [15]
Investment bosses welcome Labour scrapping ‘gimmicky’ British ISA – P.A. via Yahoo Finance [16]
State pension set to rise by over £400 in 2025 – Pensions Age [17]
Housing Secretary Angela Rayner says fix unsafe cladding faster – BBC [18]
Tenants in rent arrears to rise, landlords warned – This Is Money via MSN [19]
Seasonal workers on UK farms in ‘unhealthy and dangerous’ accommodation – ITV [20]
The hoped-for IPO boom isn’t happening in 2024 – Crunchbase [21]
[22]
Ireland’s luxury problem: what to do with its €8.6bn surplus [Search result] – FT [23]
Products and services
Mortgage rate cuts continue, as Santander set to slash loan costs – This Is Money [24]
Apple Pay is amazing, and it’s about to change – The Verge [25]
Get £100-£2,000 cashback when you open a SIPP with Interactive Investor [26] (T&Cs apply. Capital at risk) – Interactive Investor [26]
Coventry BS’ new lottery-style regular savings account pays 6.25% – Which [27]
Five questions to ask yourself before buying an annuity – Which [28]
Open an account with low-cost platform InvestEngine via our link [29] and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine [29]
Pay-as-you-go schooling: parents pressured to fund essentials – Guardian [30]
How to keep your phone safe – This Is Money [31]
Club Pret review: is it still worth it? – Be Clever With Your Cash [32]
Family homes for sale in super suburbs, in pictures – Guardian [33]
Comment and opinion
The best AI fund of 2024? The S&P 500 – Sherwood [34]
Dan Neidle: a UK wealth tax “wouldn’t work” [Search result] – FT [35]
Yes, you can eat risk-adjusted returns – Cullen Roche [36]
Steve Webb: three ‘fairer’ ways to reform Winter Fuel Allowance – This Is Money [37]
Our balancing act – Humble Dollar [38]
Helping a loved one die risks forfeiting inheritance, lawyer warns – T.I.M. [39]
31 years of US stock market returns – A Wealth of Common Sense [40]
Tips to help you spend less (or more) in retirement – Morningstar [41]
Elusive alpha, corrosive costs – CFA Institute [42]
A philosophical perspective on retirement – The Conversation [43]
Capital gains tribulations – Simple Living in Somerset [44]
The butterfly affect, index funds, and the rise of mega caps [Nerdy, unconvincing to me1 [45]] – Klement on Investing [46]
Naughty corner: Active antics
What happens if nVidia employees hit their ‘number’? – Sherwood [47]
Li Lu and Charlie Munger and Warren Buffett [Podcast] – Founders [48]
Next shares are up 100%: time to buy or sell? – UK Dividend Stocks [49]
Why VCs keep some money in reserve – Fred Wilson [50]
Fund bets that happier workers produce healthier returns [Search result] – FT [51]
A frontline view from inside a hedge fund – Investment Ecoystem [52]
The power of private equity [Podcast] – Capital Allocators [53]
Plunging office property values alarm Washington – Politico via MSN [54]
Kindle book bargains
Quit: The Power of Knowing When to Walk Away by Annie Duke – £0.99 on Kindle [55]
The Good Enough Job by Simon Stolzoff – £0.99 on Kindle [56]
Grit: The Power of Passion and Perseverance by Angela Duckworth – £0.99 on Kindle [57]
The Missing Cryptoqueen by Jamie Bartlett – £0.99 on Kindle [58]
Environmental factors
The big Baltic bomb cleanup – Hakai [59]
2024 was the hottest summer on record in Europe and globally – Copernicus [60]
Can solar costs keep shrinking? – Uncharted Territories [61]
The powerful potential of tiny urban conservation plots – Noema [62]
Are all heat pumps noisy? – This Is Money [63]
Robot overlord roundup
The world’s call centre capital is gripped by AI fever and fear – Bloomberg [64] [h/t Abnormal Returns [65]]
How AI disrupts tech investing – Uncharted Territories [66]
Rushin’ to the Russians mini-special
Why a Pro-Putin movement is expanding across the former Soviet bloc – The Conversation [67]
The kleptocrats aren’t just stealing money. They’re stealing democracy [Search result] – FT [68]
Dimwitted rightwing influencers accused of being unwitting Russian assets – Defector [69]
Off our beat
“When the Bitcoin scammers came for me” – The Atlantic [70]
How dating apps contribute to the demographic crisis – Kyla Scanlon [71]
Nate Silver on his new book, On The Edge: The Art of Risking Everything [72] – Numlock [73]
Weight-loss drug linked to fewer Covid deaths – Harvard [74]
The Chinese youth owning their unemployment – Reuters via MSN [75]
Is the fear of death holding you back? – Life After The Daily Grind [76]
And finally…
“If he had been able to sell all his assets at full market value at the moment of his death, in January of that year, [Vanderbilt] would have taken one out of every twenty dollars in circulation, including cash and demand deposits.”
– T.J. Stiles, The First Tycoon: The Epic Life of Cornelius Vanderbilt [77]
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- Nearly all the mega caps also happen to have best-in-history fundamentals in terms of sales growth, margins, and market dominance… [↩ [85]]