Category: Economoney

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Institute for Fiscal Studies (IFS) says UK has highest tax burden since Second World War

UK taxes high!

It has been suggested Rishi Sunak and Boris Johnson have overseen biggest tax rises since the Second World War

‘Fiscal responsibility’ – code words for ‘cock-up!’

Chancellor Jeremy Hunt and Prime Minister Rishi Sunak have stressed the need for ‘fiscal responsibility’ amid still-high inflation and rising debt costs.

According to the Institute for Fiscal Studies (IFS), by the time of the next general election, taxes will likely have risen to around 37% of national income, which is the highest level since comparable records began in the 1950’s. 

The IFS said that this is equivalent to around £3,500 more per household, but it will not be shared equally across income group.

Health and Welfare massive tax burden

The IFS also said that this is not a direct consequence of the pandemic, but rather a result of decisions to increase government spending on health and welfare, and some unwinding of austerity. They predicted that this parliament would mark a decisive and permanent shift to a higher-tax economy.

Other think tanks, such as the Nuffield Foundation, have echoed this view and said that there will be strong pressure in future parliaments to raise taxes further to meet growing demand for public services.

Dissatisfied

Some Conservative MPs have expressed their dissatisfaction with the lack of tax cuts from the government, as they believe that reducing taxes is a key part of the party’s philosophy. Chancellor Jeremy Hunt and Prime Minister Rishi Sunak have stressed the need for fiscal responsibility amid still-high inflation and rising debt costs.

Lurching from one problem to the next

We saw this type of response under George Osborne during the ‘austerity’ period after the financial crisis of 2008. And now again, after Brexit and the pandemic. They were all Conservative governments.

Hunt has reportedly said it would be virtually impossible to cut taxes at the moment – no surprise there then!

Labour has criticised the government for clobbering the general public with tax rises and failing to deliver growth and wages.

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Good news is bad news, and now bad news is bad news too

Stock market jitters

The stock market can’t get a break

It’s frustrating!

The stock market can be very volatile and unpredictable, especially in times of uncertainty and crisis. It seems like investors are reacting to every piece of news, whether it’s good or bad, with fear and panic.

According to some analysts, the main factors that are driving the market turmoil are the rising bond yields, the slowing global growth, the ongoing trade tensions, and the potential fiscal risks. These issues have created a lot of uncertainty and anxiety among market participants, who are looking for signs of stability and direction.

Long-term investing makes sense

Some experts suggest that the best way to deal with the market volatility is to have a long-term perspective, diversify your portfolio, and avoid emotional decisions. They also advise to stay informed, but not to overreact to every headline or rumour.

Remember that the market has gone through many ups and downs in the past and has always recovered over time.

Make sure as always… do your research!

RESEARCH! RESEARCH! RESEARCH!

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Luddites against BIG tech’ – a modern rebellion

Luddites

What are Luddites?

Luddites were a group of workers who protested against the use of machinery that threatened their livelihoods in the early 19th century in Britain. They were not opposed to technology in general, but to the specific machines that were ‘taking away their livelihoods’.

They attacked factories and smashed machines that were replacing their jobs with cheaper and less skilled labour.

BIG tech Luddite comparison – is AI the latest threat?

Some people have compared the Luddites to the modern movements that resist the effects of Big Tech and artificial intelligence (AI) on workers’ lives. They argue that these technologies are creating a new wave of automation that is displacing workers, eroding their rights, and increasing inequality. 

They also point out that the Luddites had the support of a majority of English people and eventually led to changes in the law that improved workers’ conditions.

Progress?

However, others have criticized this comparison as inaccurate or misleading. They claim that the Luddites were not successful in stopping technological progress, and that their actions were violent and destructive. 

Technology will create new jobs

They also suggest that the Luddite fallacy, which refers to the belief that technological progress causes mass unemployment, has been proven wrong by history. They contend that technology can create new opportunities and benefits for workers, as long as society adapts and regulates it properly.

The question of whether a new modern Luddite rebellion can rise against Big Tech is not a simple one. It depends on how we define Luddites, how we evaluate the impacts of technology, and how we respond to the challenges and opportunities it presents.

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The development of a controversial UK oil field, Rosebank, has been given the go-ahead

The Rosebank oil and gas field is a controversial project that has been approved by the UK government despite the concerns of environmental activists and some politicians.

It is located about 80 miles west of Shetland in the North Sea and is estimated to contain 500 million barrels of oil. It is operated by Equinor, a Norwegian state-owned energy company, with its partners Ithaca Energy and Suncor Energy. The development of the field is expected to cost £6 billion and create 2,000 jobs. 

Carbon conflict

It is also expected to produce 200 million tonnes of carbon dioxide over its lifetime, which is equivalent to the annual emissions of 40 million cars.

The approval of the Rosebank field has sparked a debate over the role of fossil fuels in the UK’s energy transition and its commitment to net zero emissions by 2050. Critics argue that the project is incompatible with the UK’s climate goals and that it will undermine its credibility. They also claim that most of the cost of the development will be borne by the taxpayers through tax reliefs and subsidies.

UK not yet ready to turn off the oil and gas

However, some supporters of the project contend that it will provide a reliable source of energy and revenue for the UK, as well as support thousands of jobs in the oil and gas sector. They also point out that the UK still relies on fossil fuels for most of its energy needs and that it will need to import more oil and gas from abroad if it does not develop its own resources. 

'Didn't expect to see you here again, thought you'd retired'. 'Yeah, me too!'
‘Didn’t expect to see you here again, thought you’d retired’. ‘Yeah, me too!’

They argue that the Rosebank field will be developed with high environmental standards and that it will contribute to the UK’s transition to a low-carbon economy by investing in renewable energy and carbon capture technologies.

Contentious

The Rosebank oil and gas field is a complex and contentious issue that reflects the challenges and trade-offs involved in balancing economic growth, energy security, and environmental protection. It is likely to remain a topic of heated discussion.

The field is expected to start producing oil from 2026

If drilling starts on time, Rosebank could account for 8% of the UK’s total oil production between 2026 and 2030.

Roughly 245 million barrels will be produced in the first five years of drilling, with the remaining being extracted between 2032 and 2051.

Though oil is the main product, the site will also produce gas.

About 1,600 jobs are expected to be created during the peak of construction. Long term, the operation will create 450 jobs.

Will it mean lower energy bills in the UK?

No! Oil and gas from UK waters is not necessarily used here – it is sold to the highest bidder on global markets.

What Rosebank produces will be sold at world market prices, so the project will not cut energy prices for UK consumers.

The Norwegian state oil company Equinor – which is the majority owner of Rosebank – has confirmed this.

Oil also tends to be sent around the world to be refined – the UK does not have the capacity to refine all its own oil-based products.

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Treasury yields reach levels not seen in more than 15 years

U.S. yields

10 year yield

The benchmark 10-year Treasury yield rose Wednesday 27th September 2023, to its highest level in more than 15 years, as traders navigated fears of persistent inflation and higher interest rates for longer than expected.

The 10-year Treasury yield climbed to 4.612%. It had reached 4.566% on Tuesday 26th September 2023, its highest level since 2007.

2 year yield

The 2-year Treasury yield also added 6 basis points to 5.139%.

FED said

Federal Reserve suggested last week that interest rates would go higher still and remain elevated for longer, prompting concerns among investors about what it could mean for the economy.

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Credit card losses mount

Credit cards

Credit card losses in the U.S. are rising at the fastest pace since the Great Financial Crisis of 2008. 

Goldman Sachs reportedly predicts that credit card losses will continue to climb through the end of 2024 or early 2025 for most issuers. This is unusual because the losses are accelerating outside of an economic downturn. 

Unusual trend

The main factors behind this trend are higher interest rates from the Federal Reserve and a surge in spending since the pandemic. 

U.S. citizens owe more than $1 trillion on credit cards, a record high, according to the Federal Reserve Bank of New York. Credit card defaults, which occur when a borrower fails to repay debt and the lender writes it off, are also projected to increase by 20% year-over-year in 2023.

This could have negative implications for the economy and consumers’ financial well-being.

Debt is building.

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UK pound closes in on a six month low

GB Pound Sterling


According to the latest data, 1.00 GBP is equal to 1.22 USD

This means that one British pound can buy 1.22 U.S. dollars at the current market rate. The exchange rate fluctuates depending on various factors such as supply and demand, interest rates, inflation, trade balance, and political stability.

Weak against U.S. dollar

The British pound has been weakening against the U.S. dollar since the Brexit referendum in 2016, when the UK voted to leave the European Union. The uncertainty and instability caused by the Brexit process have reduced the confidence and attractiveness of the British currency in the global market. The U.S. dollar, on the other hand, has been strengthening due to its status as a safe haven and a reserve currency in times of crisis.

In September 2022 the pound fell to its lowest level against the U.S. dollar

  • Excessive government spending and tax cuts that undermined confidence in the UK economy.
  • Price caps and record high inflation that eroded the purchasing power of the pound.
  • The strength of the dollar as a safe haven currency amid global uncertainty.
  • The prospect of a new Scottish independence referendum that increased political risk.
  • The impact of the Covid pandemic and the Russia-Ukraine conflict on supply chains and trade.

Artwork of GBP

GB Pound £
UK pound closes in on a six month low

September 2022

The pound reached $1.0327 at one point in late September 2022, its lowest since Britain went decimal in 1971. It also fell more than 1% against the euro to about 86.80p, its lowest level since May 2020.

Today, 22nd Septmber 2023

The current exchange rate of 1.22 USD per GBP is near the lowest point in the last 30 and 90 days, which was 1.2383 USD per GBP. 

The highest point in the same period was 1.3128 USD per GBP. The average exchange rate in the last 30 days was 1.2563 USD per GBP, and in the last 90 days was 1.2721 USD per GB pound.

Pound Sterling from 2012 – 2023

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Surprise! Bank of England hold rates steady at 5.25%

Surprise!

UK interest rates have been left unchanged at 5.25% by the Bank of England (BoE).

The decision comes a day after figures revealed an unexpected slowdown in UK nflation in August 2023.

The Bank had previously raised rates some14 times in a row to tackle inflation, leading to increases in mortgage payments, business loans and consumer borrowing. But it also delivered higher savings rates.

The inflation target for the Bank of England is 2%

The latest move raises the prospect that this cycle of rate increases may have peaked.

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For most of us eating less and taking moderate exercise will help with our general health and weight loss… and then we have DRUGS!!!

Medical syringe

Fat profits for the pharmaceutical sector again.

The maker of weight-loss drug ‘Wegovy’ has become Europe’s most valuable company, dethroning the French luxury conglomerate LVMH.

Is there an irony here…? Exploitation of the obese, or a genuine attempt to help? It is used in the fight against diabetes too.

It’s a business after all

Wegovy is a brand name for ‘Semaglutide‘, a prescription medicine used for weight loss in obese or overweight adults with other weight-related medical issues. It works by regulating appetite and reducing calorie intake, leading to weight loss and helping with weight management.

Wegovy was launched in the UK on 4th September 2023 and is available on the NHS as an ‘option‘ for weight management in line with NICE guidance, alongside a reduced-calorie diet and increased physical activity. However, only people with the highest medical need may qualify for the drug, as it is in short supply and its use will be restricted – but celebrities have direct access – do they have the ‘highest medical needs’? Of course they do.

Clinical trials

Wegovy has been shown to be effective in clinical trials, achieving up to a 15% reduction in body weight after one year. It has also been found to reduce the risk of a heart attack or stroke in obese people with cardiovascular disease by 20%.

To get Wegovy on the NHS, eligible adults would need a referral to an NHS specialist weight management service, which would usually be made by a GP. Alternatively, Wegovy can be obtained privately, but it may be expensive and not covered by insurance.

Watercolour image of a generic medicine bottle. Wegovy is a brand name for ‘Semaglutide‘, a prescription medicine used for weight loss in obese or overweight adults with other weight-related medical issues.

Shares rose after the Danish pharmaceutical giant, Novo Nordisk, launched the popular drug in the UK.

At the close of trading on Monday, 4th September 2023, the company had a stock market valuation of $428bn (£339bn).

The drug is now available on the National Health Service in the UK and also via private outlets.

Obesity treatment

Wegovy is an obesity treatment that is taken once a week which tricks people into thinking that they are already full, so they end up eating less and losing weight.

Famous personalities such as Elon Musk are among the reported users of the drug, which has gained traction in Hollywood and with the public more widely since it was approved by regulators in the US in 2021.

Wegovy and Ozempic – a diabetes treatment with similar effects – have been described as ‘miracle’ drugs. Would that be a ‘miracle for the user or for the pharmaceutical company – or both perhaps?

Experts warn the drug is not a quick fix nor a ‘substitute for a healthy diet and exercise’.

In trials, users often put weight back on after stopping treatment.

‘Supply restriction as production ramps up’

There has been a global shortage of the drug, so only limited is awailable for the NHS in the UK.

The company said it will continue to restrict global supplies as it works to ramp up manufacturing.

While the findings still have to be fully reviewed, experts agreed the results were potentially significant.

Exercise, eat less and take… Wegovy!!

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U.S. holds interest rates at 5.25% – 5.5%, but expect higher rates for longer

Central banker

Fed holds steady

The Federal Reserve held interest rates steady in a decision released Wednesday 20th September 2023, while also indicating it still expects one more hike before the end of the year and fewer cuts than previously indicated next year.

That final increase, if realised, would be it for now according to data released at the end of the Fed two-day meeting. If the Fed goes ahead with the move, it would be the twelfth rate hike since policy tightening began in March 2022.

No change priced in

Markets had fully priced in no move at this meeting, which kept the fed funds rate targeted in a range between 5.25%-5.5%, the highest in some 22 years. The rate fixes what banks charge each other for overnight lending but also affects many other forms of consumer debt too.

While the no-hike was expected, there was plenty of uncertainty over where the rate-setting Federal Open Market Committee (FOMC), would go from here.

Judging from reports released Wednesday 20th September 2023, the bias appears towards more restrictive policy and a higher-for-longer approach to interest rates.

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Polluting car and climate push back

Climate target push back

New car show room

Climate target push back
”I’d like to buy a new car please’. ‘Yes, of course… do you want a… gas, coal, wood, petrol, diesel, vegetable oil, virgin oil, hydrogen, electric, hybrid, pedal, jet, or rice powered one?” ‘Umm, I think I’ll leave it for now thank you’.

We just don’t have the funds, do we?

UK Prime Minister Rishi Sunak is reportedly planning to water down some of Britain’s climate commitments, saying the country must fight climate change without penalising workers and consumers.

Sunak issued a statement Tuesday in response to a BBC report saying the prime minister is considering extending deadlines for bans on new petrol and diesel cars – currently due in 2030 —- and on new natural-gas home heating.

The news drew dismay from environmental groups, opposition parties and some members of Sunak’s Conservative Party. It broke as senior politicians from the U.K. and around the world gather at the United Nations General Assembly in New York, where Biden and Yellen have placed climate high on the agenda.

Senior Tories who have championed net zero policies are reportedly furious at Sunak’s plans to delay or water down green measures. They warn that the decision will cost the U.K. jobs, inward investment and future economic growth that could have been theirs by committing to the industries of the future.

We won’t save the UK by bankrupting its people – Braverman

Home Secretary Suella Braverman says she backs Rishi Sunak’s expected shift on how the UK gets to net zero carbon emissions.

‘We’re not going to save the country by bankrupting the British people,’ she told BBC Breakfast.

It must be true, I’ve just seen it on the news. Is the UK broke? Is this the real reason for the climate roll-back?

‘We’re not going to save the country by bankrupting the British people’.

I for one am very confused??

Does the UK have the money? Is it a too big-a-burden for the UK tax payer? Can the UK generate enough ‘POWER’ from renewables? The UK needs fossil fuels?

Most of the world still needs fossil fuels!

Are we really ready to switch yet? Renewables and fossil fuels will have to work hand-in-hand for some time yet.

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UK inflation in surprise fall, a ‘massive’ drop all of 0.1%

UK inflation

ONS says inflation dropped in August 2023

According to the Office for National Statistics (ONS), the UK’s inflation rate dropped unexpectedly in August 2023 to its lowest level since the start of Russia’s invasion of Ukraine, which led to sharp rises in energy and food costs which were already on the rise due to the pandemic.

The Consumer Prices Index (CPI) rose by 6.7% in the 12 months to August 2023, down from 6.8% in July. The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 6.3% in the 12 months to August 2023, down from 6.4% in July.

The ONS said that the main factors behind the fall in inflation were lower prices for clothing, footwear, and second-hand cars, partly offset by higher prices for transport services and recreational goods. 

UK Inflation 1989 – 2023 (ONS data)

The ONS also said that the inflation rate was still high compared with historical levels, and that it expected it to rise further in the coming months due to increases in energy bills and supply chain pressures.

You can find more details and data about the UK inflation and price indices on the ONS website or on the Consumer price inflation, UK: August 2023 time series.

Jeremy says its OK!

Chancellor Jeremy Hunt said the news showed ‘the plan to deal with inflation is working’. Well Jeremy, your comments are encouraging – if you truly believe a 0.1% fall in inflation is ‘working‘. Where were you when the Bank of England lost control of the ‘2% inflation remit’.

UK inflation
‘Don’t worry – the money is being printed as we speak. Come and get your share now!’

Where were you when the excessive ‘uncontrolled’ government borrowing infected the UK’s economy? With all that ‘free’ money sloshing around the system, what did you really expect would happen..?

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NHS Strike action again, with nearly 8 million waiting in the queue

Consultants and doctors joint strike

British Medical Association-organised strike

Consultants and junior doctors in England are holding their first joint strike in the history of the NHS.

Waiting list

The latest data from NHS England, states the number of people waiting to start routine hospital treatment is at a record high of 7.68 million at the end of July 2023. This is up from 7.57 million in June 2023 and the highest since records began in August 2007. 

The waiting list has increased by more than 3 million since February 2020, the last full month before the start of the pandemic. The NHS is facing many different challenges due to the impact of Covid-19 on its services, staff and resources. This data suggests that the waiting list was already at 4 million even before the pandemic hit.

The latest strike action is a major factor now contributing to the NHS waiting list. Some reports suggest that over 850,000 routine operations and procedures have been cancelled so far this year, 2023 due to strike action alone.

Factors that may have contributed to the historical rise in the waiting list

  • The suspension or reduction of non-urgent care during the peak of the pandemic to free up capacity for Covid-19 patients.
  • The ongoing infection prevention and control measures that limit the number of patients that can be treated safely in hospitals.
NHS Strike action again, with nearly 8 million waiting in the queue
  • The staff shortages and burnout that affect the availability and productivity of the workforce.
  • The increased demand for health services as people seek help for conditions that were delayed or worsened by the pandemic.
  • Strike action.

The NHS is working hard to tackle the backlog and improve access to care for patients

  • Increasing funding and capacity for elcare, such as by opening more operating theatres, expanding community services and using the independent sector.
  • Implementing new models of care, such as virtual consultations, digital triage and shared decision making, to reduce unnecessary referrals and appointments.
  • Prioritising patients based on clinical urgency and need, rather than waiting time alone, to ensure that those who would benefit most from treatment are seen first.
  • Supporting staff wellbeing and retention, such as by offering flexible working, training and development opportunities and mental health support.

What about health education?

Government action

The government has also pledged to invest an extra £36 billion over the next three years to help the NHS recover from the pandemic and reform social care. However, some experts have warned that this may not be enough to address the underlying issues that affect the NHS performance and quality, such as workforce planning, public health funding and health inequalities.

How did it get so bad?

Lack of money or management failures? It has to one of these two. Throwing funds at an already badly managed ‘business’ will just amplify the problem allowing even more waste. And as the ‘system’ tackles the problem, more and more people will needlessly continue to suffer.

Fix our health service by fixing the people first!

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Instacart 75% plunge in valuation

Instacart IPO

Venture firms take a hit

Sequoia Capital and Andreessen Horowitz, two of Silicon Valley’s most high-profile venture firms, are poised to take a massive hit on their investments in grocery delivery company Instacart, a deal that closed in 2021 as tech stocks were soaring.

In its latest IPO prospectus update, Instacart said it plans to sell shares at $28 – $30 a share, valuing the company at around $10 billion at the top of the range. That’s more than 75% below where Sequoia and Andreessen invested in early 2021. At that time, Instacart sold shares at $125 a pop valuing Instacart at $39 billion.

Valuation plunge

The reason for the valuation collapse is that the U.S. economy reopened after the pandemic, then inflation spiked and the Federal Reserve started raising interest rates, which were stuck near to zero throughout the Covid pandemic.

Borrowed money suddenly became expensive again, and quickly too. Tech’ companies in early stages of development, need access to research and development finance – interest rate increases restricted investment.

Instacart 75% plunge in valuation from original price of $125 per share

Then consumers started shopping again on foot, and with capital costs increasing, investors began demanding that companies find a strong path to profitability.

IPO

Instacart is trying to crack open an IPO market that’s been closed for venture-backed companies for nearly two years, so it won’t be easy. However, the ARM IPO recently may re-adjust that view.

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Bank of England hits all-time confidence low

BoE

Confidence in Bank of England (BoE) is a measure of how much the public trusts the central bank to control inflation, set interest rates and maintain economic stability. 

According to the latest Inflation ‘Attitudes Survey‘ conducted by the Bank of England in August 2023, confidence in Bank of England has plummeted to an all-time low.

Survey

The survey found that only 19% of the respondents were satisfied with the way the Bank of England was doing its job to set interest rates to control inflation, while 40% were dissatisfied. The net satisfaction rate was -21%, which is the lowest since the survey began in 1999.

2% inflation please

The main reason for the low confidence is the high inflation rate that has been persisting in the UK for more than a year. Inflation reached a peak of 11.1% in December 2022, and was still at 6.8% in July 2023, well above the Bank of England’s target of 2%. The Bank of England has raised interest rates 14 times since the end of 2021, from 0.1% to 5.25%, to try to bring inflation down, but this has also increased the cost of borrowing and living for many households and businesses.

Slow

Some critics have argued that the Bank of England (BoE) acted too slowly and too cautiously to raise interest rates when inflation was rising, while others have warned that raising rates too high and too fast could harm the economic recovery from the Covid-19 pandemic. 

The public’s expectations of future inflation are also high, with a median answer of 2.9% for inflation in five years’ time, almost one percentage point higher than the Bank’s target.

Credibility

Confidence in Bank of England (BoE) is important because it affects how people behave in terms of spending, saving, investing, and borrowing.

Bank Governor
Bank of England hits all-time confidence low according to survey

Loss of faith

If people lose faith in the central bank’s ability to control inflation and maintain economic stability, they may act in ways that could worsen the situation, such as hoarding money, demanding higher wages, or taking on more debt.

Therefore, it is crucial for the Bank of England to communicate clearly and effectively with the public about its policies and actions, and to restore trust and confidence in its role as an independent and credible institution.

It is also useful to take notice of early warning signs, such as the economic red alert posed by inflation after the pandemic recovery started.

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FTSE 100 enjoys best week of the year, September 2023

FTSE 100

FTSE 100 index

The FTSE 100 is the index of the 100 largest companies listed on the London Stock Exchange by market capitalization. It is one of the most widely used indicators of the UK economy and the performance of British businesses.

The FTSE 100 had its best week of the year in the week ending 15th September. The index closed at 7,711 points on 15th September 2023. This was the highest weekly gain of 2023.

FSTE 100 close Friday 15th September 2023

This was a strong end to the week, as the global stocks rally continued with a stable showing from Wall Street and an improvement in China.

Arm IPO led the way with a successful return tothe stock market.

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AI pumped technology can surpass human intelligence ‘big time’ – according to SoftBank’s CEO

Arm AI chip

Masayoshi Son says AI to surpass human intelligence and that SoftBank will ‘rule the world’. Oh dear…!

Main points in brief

  • Masayoshi Son reportedly said AI is capable of helping solve the world’s biggest problems and could potentially surpass the intelligence of humans.
  • He said he was a ‘big believer’ in AI and that Arm, a chip design company owned by Softbank, was a ‘core’ beneficiary of the AI revolution.
  • He said AI would supercharge human ability and that Softbank would ‘rule the world’ and win the latest generative-AI race thanks to its heavy investment in startups and its majority stake in Arm.
  • He also acknowledged that AI posed some threats to humanity if mishandled and that society should regulate it to protect humankind.

Masayoshi Son and SoftBank

The 66-year-old founded SoftBank, which still controls about 90% of Arm Holdings after the IPO, back in 1981 after graduating from the University of California, Berkeley. Forbes estimates his net worth at more than $24 billion, making him the world’s 69th richest person.

Son made his early reputation as an investor in Japan’s mobile phone industry, and went on to become one of the first backers of Yahoo as well as Alibaba. Son continues to serve as the chairman of Arm’s board of directors.

AI does pose some threats to humanity if mishandled, Son said, likening its potential misuse to the dangers of speeding, or drinking alcohol while driving a car. But, more positively, AI can also help solve key world problems like diseases or help mitigate or recover from natural disasters, he reportedly said.

‘AI, society should regulate to protect humankind’, Son said. ‘However, it has more merit than the demerits. So, I think I’m a believer. I’m optimistic that AI is going to solve the issues that mankind couldn’t solve in the past‘.

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EU interest rates up again to 4%

Eurozone interest rates

Eurozone interest rates have been hiked again to a record high by the European Central Bank (ECB).

The bank raised its key rate for the 10th time in a row, to 4% from 3.75%, as it warned inflation was expected to remain too high for too long.

The latest increase came after forecasts predicted inflation, which is the rate prices rise at, would be 5.6% on average in 2023. However, the ECB signalled that this latest hike could be the last for now.

‘The council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target’, the bank reportedly said. The central bank originally expected inflation to be ‘transitory’.

It added that it expected inflation in the 20-nation bloc to fall to around 2.9% next year and 2.2% in 2025.

As in other parts of the world, the eurozone has been hit by rising food and energy prices that have squeezed household budgets and from the Russia/Ukraine war. Central banks have been increasing interest rates in an attempt to tame inflation and slow rising prices.

More expensive to borrow

The theory behind increasing rates is that by making it more expensive for people to borrow money, the ‘consumer’ will then have less excess cash to spend, meaning households will buy fewer things and then price rises will ease. But it is a balancing act as raising rates too aggressively could cause a recession.

Interest rates in the UK are currently higher than in the eurozone at 5.25%, but UK inflation is also higher at 6.8%, and the Bank of England is expected to raise rates again next week.

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Arm juggernaut of an IPO

Arm Holdings

Ultra successful IPO for arm

Investors gobbled up UK microchip designer Arm Holdings at its U.S. debut on the Nasdaq on 14th September 2023, sending its market value soaring to $60 billion (£48.3 billion).

The shares ended the day worth more than $63 each, after climbing by almost 25% from the high end start of $51 per share set by Arm.

The sale was the biggest initial public offering of the year, raising $4.87 billion for owner Softbank Group.

Despite some concerns surrounding the company’s exposure to risks in China and a potential AI slowdown – the shares soared.

British tech

A star of the British technology industry, Arm designs microchips for devices including smartphones and game consoles. It estimates that some 70% of the world’s population uses products that rely on its chips, including nearly all of the world’s smartphones. And with AI nestling in on the horizon, the future potential for Arm is massive.

Arm stock chart 14th September 2023

Arm said it expects the total market for its chip designs to be worth about $250 billion by 2025, including new growth areas such as data centres and cars.

Legacy

Many of Arm’s royalties come from products released decades ago. About half of the company’s royalty revenue of $1.68 billion in 2022, came from products released between 1990 and 2012.

Bright Future

The future looks bright for Arm but the company is trading at more than 25 times its most recent full year of revenue, and at more than 100 times profit.

And that could be where things get tricky for Arm in the not too distant future. Projections for future profits will be interesting, esecially if it’s to keep up with Nvidia for instance.

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UK mortgage arrears by value climbs

Mortgage arrears

The value of UK mortgage arrears jumped by almost a third in April to June 2023 compared with the same period last year, according to the Bank of England (BoE).

Outstanding mortgage debt is now £16.9bn, the highest since 2016, it said.

Mortgage costs have risen for millions as the Bank has repeatedly hiked interest rates to slow soaring prices.

Some experts warn defaults will rise, but others say the number unable to repay remains relatively low.

According to the BoE, in April-June 16% of mortgages in arrears were new cases, which it said ‘was little changed compared to the previous quarter’.

It added that the proportion of mortgages in arrears was the highest since 2018.

See UK debt burden here

UK mortgage arrears
Debt burden – the value of UK mortgage arrears jumped by almost a third in April to June 2023
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U.S. inflation ticks up from 3.2% to 3.7% according to August data release

U.S. Inflation

Latest U.S. inflation figures

The latest inflation figures for the U.S. show that the annual inflation rate rose to 3.7% in August 2021, up from 3.2% in July 2021. This was mainly driven by a sharp increase in energy prices, which jumped up 10.5% over the last month. Gas (petrol) prices accounted for more than half of the increase in the overall inflation rate.

Core inflation

However, core inflation, which excludes the volatile food and energy sectors, slowed down to 4.3% in August 2021, down from 4.7% in July 2021. This suggests that the Federal Reserve’s ’11’ rate hikes are having some effect on cooling the inflationary pressures in the economy. Some sectors, such as used cars, medical care services and airfare, saw price decreases in August 2021.

Will the Fed keep interest rates unchanged at its next meeting on September 20, 2021, as we wait to see the full impact of its previous rate hikes on the economy?

However, the Fed may still raise interest rates later this year if inflation remains persistently above its target of 2%. Higher interest rates could introduce more volatility to the U.S. economy and potentially trigger a recession.

July U.S. inflation data here

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UK economy contracts July 2023 due to… rain!

UK GDP contracts

The UK economy shrank more than expected in July due to strike action taken by NHS workers, doctors and teachers – ONS data shows.

Wet weather also hit the construction and retail industries, the Office for National Statistics (ONS) said, causing the economy to contract by 0.5%.

The figures were worse than analysts had predicted and continue a trend of weak economic growth in the UK.

Blame the weather and strike action for the contraction

Office for National Statistics (ONS) for UK GDP as at 13th September 2023..

Monthly real GDP is estimated to have fallen by 0.5% in July 2023, with falls in all three main sectors, following growth of 0.5% in June 2023.

GDP showed 0.2% growth in the three months to July 2023 when compared with the three months to April 2023, with growth in all three main sectors.

Services output was down 0.5% in July 2023, after growth of 0.2% in June 2023, and was the main contributor to the fall in GDP in July.

Production output fell by 0.7% in July 2023, after growth of 1.8% in June 2023.

The construction sector fell by 0.5% in July 2023, after growth of 1.6% in June 2023.

Not a recession, but the weather gets the blame for slowing up UK progress!

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The Magnificent Seven Tech Stocks – STOCK WATCH

The Magnificent Seven

Top tech stocks

The Magnificent Seven is a term to describe seven tech’ stocks that have been surging in 2023.

  • Meta Platforms (formerly Facebook), the social media giant that also owns Instagram, WhatsApp, and Oculus.
  • Apple, the maker of the iPhone, iPad, Mac, Apple Watch, AirPods, and other popular devices and services including cloud and Apple TV streaming service.
  • Amazon, the e-commerce leader that also operates AWS, Prime Video, Alexa, and Whole Foods.
  • Alphabet, the parent company of Google, YouTube, Gmail, Google Cloud, and Waymo.
  • Microsoft, the software company that owns Windows, Office, Azure, LinkedIn, Xbox, and Teams.
  • Nvidia, the semiconductor company that produces graphics cards, gaming devices, data center solutions, and AI platforms.
  • Tesla, the electric vehicle maker that also develops solar panels, batteries, and autonomous driving technology.

Dominant

These seven stocks are considered to be dominant in their respective fields and have strong growth prospects driven by innovation and artificial intelligence (AI).

They have outperformed the broader market and attracted many investors who are looking for exposure to the tech’ sector. Some analysts believe that these stocks will continue to lead the market in the future, while others caution that they may face regulatory challenges, competition, or valuation issues.

Approximate combined market cap of the Magnificent Seven tech stocks

The approximate combined market cap value of the Magnificent Seven as of September 2023 is approximately $11.8 trillion.

  • Apple: $2.5 trillion
  • Microsoft: $2.3 trillion
  • Alphabet: $1.9 trillion
  • Amazon: $1.7 trillion
  • Nvidia: $0.8 trillion
  • Meta Platforms: $0.9 trillion
  • Tesla: $0.7 trillion

Note that these values will change over time as the stock prices fluctuate.

A way to trade the tech sector is through funds

There are many funds that can trade tech stocks, depending on your investment objectives, risk tolerance, and preferences.

Technology mutual funds: These are funds that invest in a diversified portfolio of technology companies across different industries, such as software, hardware, internet, cloud, biotech, and more. Technology mutual funds can offer exposure to the growth potential of the tech sector, as well as reduce the volatility and risk of investing in individual stocks. 

Some examples of technology mutual funds are Fidelity Select Technology Portfolio (FSELX), Columbia Global Technology Growth Fund (CGTYX), and Schwab U.S. Large-Cap Growth Index Fund (SCHG).

Which tech fund to invest in?

Technology exchange-traded funds (ETFs): These are funds that track an index of technology stocks and trade on an exchange like a stock. Technology ETFs can offer low-cost and convenient access to the tech sector, as well as allow investors to choose from different themes, such as cybersecurity, artificial intelligence (AI), cloud computing and more. 

Some examples of technology ETFs are Invesco QQQ Trust (QQQ), Technology Select Sector SPDR Fund (XLK), and VanEck Vectors Semiconductor ETF (SMH).

Technology index funds: These are funds that replicate the performance of a specific technology index, such as the Nasdaq 100, the S&P 500 Information Technology Index, or the Morningstar U.S. Technology Index. Technology index funds can offer broad and passive exposure to the tech sector, as well as low fees and high tax efficiency.

Some examples of technology index funds are Fidelity NASDAQ Composite Index Fund (FNCMX), Vanguard Information Technology Index Fund Admiral Shares (VITAX), and iShares Morningstar U.S. Technology ETF (IYW).

NOTE: These are not recommendations. Investments may go up or down. Your money is at risk!

Always do your own research…

REASEARCH! REASEARCH! RESEARCH!

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‘Even if I knew that tomorrow the world would go to pieces, I would still plant my apple tree’.

Apple Tree

Martin Luther 1483 – 1546

Martin Luther was a German theologian and leader of the Protestant Reformation in the 16th century. He is known for his writings and teachings on topics such as justification by faith, the authority of Scripture, the priesthood of all believers, and the freedom of the Christian.

He also translated the Bible into German and wrote many hymns, catechisms, and commentaries.

He is widely regarded as one of the most influential figures in the history of Christianity.

Apple Tree
‘Even if I knew that tomorrow the world would go to pieces, I would still plant my apple tree’.

See other quotes

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Apple $200 billion loss in just a few days – NASDAQ falls

Apple

50 million iPhones sold in China every year

Apple sells around 50 million iPhones in China annually. A sweeping ban is what investors fear and that spells trouble for Apple.

Apple stock drops after The Wall Street Journal reported a day earlier that Chinese authorities have curbed the use of the iPhone. Apple’s flagship product will no longer be legal to use by some central government officials.

The potential crackdown threatens to dissrupt Apple’s sales as China accounts for about 20% of Apple’s total revenue. Uncertainties about the news prompted investors to retreat from Apple postions, leading to a 6% drop in Apple shares in two days. More than $200bn of market cap was wiped out.

$200 market cap drop

Apple shares fall $200 billion in just days September 2023

The iPhone commeth

Adding to the concern, Apple is just days away from its key event. On the 12th september 2023, the company is expected to officially announce the launch of its newest smartphone – the iPhone 15.