0:00

John Marin, Happy New Year. I

0:02

missed you how much you too?

0:03

Happy New Year.

0:05

I'm happy New Year to our listeners. Very kindly.

0:07

You just I'll be with that now. Listen, John.

0:09

This week is an exciting week,

0:11

or rather everybody thinks it's an exciting week. Maybe

0:13

it's a depressing week. I don't know. It's the fortieth anniversary

0:16

of the beginning of the calculation of the

0:18

FOOTSY one hundred. But

0:21

but I want to be absolutely clear.

0:23

All the other columnists are saying

0:26

that the FOOTSY one hundred's birthday

0:28

is January the third, But I want to be absolutely

0:31

clear. And I'm reading here from our favorite book,

0:33

John, The Stock Market

0:35

by John Littlewood.

0:37

That's a book.

0:38

Ah. A landmark around this time

0:41

was the launching on thirteenth

0:43

of February nineteen eighty

0:45

four of the Financial Time Stock Exchange

0:48

one hundred Share Index FOOTSY one hundred

0:50

or FOOTSIET, as it is commonly called simple

0:52

weighted index by equity market capitalization

0:55

of the largest one hundred companies. Forty

0:57

one hundred is displayed in real time at

0:59

one minute. Thirteenth February

1:01

nineteen eighty four is its first day of dealing

1:04

from a base calculation of one

1:06

thousand or third of January nineteen

1:08

eighty for so I want a nitpick. I

1:11

just want to be clear that you

1:13

could argue about whether the footsy fortieth

1:16

foote one hundredth and fortieth birthday was January

1:18

the third or February the thirteenth. So we have another

1:20

whole round of writing about it in February.

1:24

Excellent recycle. All our columns

1:26

are about six weeks.

1:27

Team, absolutely, And the exciting

1:29

thing is that when it came to the fortieth

1:32

anniversary, I wrote a column, You wrote

1:34

a column, and John Author's wrote a column,

1:37

all of which were published on the same

1:39

day Wednesday this week. I know what I

1:41

wrote in mind, tell me what you wrote in yours. I'm

1:43

a fan your fan.

1:45

Yes, a fan of

1:47

Joint Author's for death and of yourself.

1:50

No, I'm a fan of John Author's as well.

1:52

But I'm a fan of the forty one hundred. I'm

1:54

a great fan of the forty one hundred. I

1:56

wrote about how we misjudge it because we don't

1:58

think about dividends, and you know, we forget

2:01

that that that cash is incredibly important

2:03

and it just keeps coming long term

2:05

cash months after month, after month after

2:07

month, and that cash flow

2:10

is incredibly undervalued. I think. So

2:12

you know, I'm a fan. I'm still theyer. Well, theoretically

2:16

I.

2:17

Agree, and I do think that the foot

2:19

seecrets a bit of a bad press.

2:22

One thing I would say, and this is what I

2:24

wrote in my column, is that after two thousand and

2:26

eight, there are boys a turning point in

2:29

that. You know, because people often talk about,

2:31

oh, look, the foot seat has barely moved since

2:33

two thousand and that's not correct.

2:36

You know, if you include dividends and all the rest of

2:38

it, and you need to include dividends because

2:40

the foot Seas are high yielding index. That's

2:42

kind of the point of it. So

2:45

if you want to compare things, then you need to do that.

2:47

And actually, between nineteen and eighty four, in two

2:49

thousand and eight, it did fine. It

2:52

was in the middle of the pack for most of that time.

2:55

It beat Japan consistently, obviously,

2:58

but also beat the US occasionally, and

3:00

it kind of beat the Europe and other

3:03

stages. So it was perfectly respectable

3:05

index. And that's all in constant

3:08

currency terms, by the way, So he

3:10

did fine. But since two thousand and eight

3:12

it has been a laggered even if

3:14

you you know, include dividends and all

3:16

the rest of it. And I

3:18

think that's the element

3:20

that I looked at in my piece

3:22

because it has had kind of a rough

3:25

time between then and now. And

3:27

I suppose what I think is

3:29

that there are reasons to

3:31

think that the things that have been kind of holding

3:33

it down over that period are

3:36

now reversing or have at least run their

3:38

course. So hopefully now there's cheap

3:40

and that the pound is cheap, does every

3:43

reason for it to you know, have a

3:45

better forties than it did thirties.

3:48

What are those things that have run its course run

3:50

their course?

3:52

Well, there's the whole well

3:54

two things basically. So there's zero percent

3:56

interest rates, which

4:00

a sort of hammered I mean, as I didn't mention

4:02

this in the piece, But obviously

4:05

they make high yielding stocks less appealing because

4:07

there's lots say kind of growth stocks become

4:09

more appealing. But it

4:11

also exploded the pension liabilities.

4:14

So the corporate defined benefit

4:17

pension schemes two thousand and eight

4:19

is the point at which they

4:22

kind of move away from equities

4:24

just turned into an absolute avalanche.

4:27

And so all of these defined benefit pension

4:29

schemes, like that's the point at

4:31

which they you

4:33

know, it had already been happening, but it kind of really

4:35

took off, the kind of move into gilts and they move

4:37

out of kind of UK stocks.

4:41

But well, now the point where there really aren't

4:43

any more UK equities

4:45

to shed on the behalf of corporate

4:48

define benefit pension schemes.

4:50

And the other point to make about that, actually, and we've

4:52

talked about this before, and I do think it's really interesting,

4:55

is that as interest rates rise, the

4:57

nominal deficits on those pinch

5:00

games full they move into surplus. There's

5:02

been a bit in the papers about that over the last couple of months.

5:04

It's suddenly these pensions games that were horribly in

5:06

deficit and there was a massive lag

5:08

on some of these big companies in the Footy

5:11

one hundred constantly having to shovel money

5:13

into the into their pension

5:15

funds to keep them keep the show on the road. Now they

5:17

find they don't have to do that anymore. So that should

5:20

in lots with free uple of cash for these

5:22

companies.

5:23

Well exactly. I mean, there was a I

5:25

can't remember if we mentioned it in the podcast or not, but there

5:27

was a big one just before Christmas

5:29

foot two fifty company called Coats,

5:32

and it basically was able

5:34

to pay off its pension deficit early becuse

5:36

of the shift. And

5:39

now you know saying okay, so that means

5:41

we're going to have, you know, something

5:43

like the region. I can't remembers a big ten millionoids

5:46

extra free cash flow every year,

5:48

which you know was a lot in the context.

5:51

So no, I mean, that's the other thing. So if that's if

5:53

that's changed, then companies are gonna have more

5:55

cash as well, and so they'll become more attractive.

5:57

But the point is the big, the big outflow from

5:59

you K equities is

6:01

how at least one big factor

6:04

in that can't really go any further

6:06

from here and prevails.

6:10

I did write a column about a decade ago saying

6:12

when when interest rates turn you

6:14

should you should buy all these companies

6:16

with big punch in depth. That's obviously about eight years too

6:18

early on that one. I should go and dig it up again. We can

6:21

recycle that one too. Well.

6:22

It's interesting, look because people forget that

6:25

it was meant to be emergency money tree policy,

6:27

and then the emergency just lasted for much

6:29

longer than pretty much any

6:31

one thought it would.

6:33

It's not just about the fifty one hundred, by the way, there's

6:36

a lot of pieces out or coming out, and more

6:38

and more will come over the next few weeks. About

6:41

how cheap smaller companies are as well. And we've

6:43

talked about this before, but there's an interesting piece

6:45

of thematic research came out from Peel

6:47

Hunt earlier this week about

6:50

just how cheap small companies are and about

6:52

the pace of M

6:54

and A forty transactions in twenty twenty

6:56

three over one hundred million average premium

6:59

paid percent, which tells

7:01

you how cheap so many UK smaller companies

7:03

are. And if you begin to see money

7:05

flowing back in there, you're going to see money flowing back

7:08

into the UK as a whole, and all this kind of thing.

7:10

You know, it's very very reflexive,

7:12

isn't it, And that the more money that flows out of the

7:14

UK, they're more miserable, it looks. And the more money

7:16

flows out and the more under performs and the more

7:18

money flows out, et cetera, and that can turn

7:20

on a sixpence I mean, I'm telling

7:22

people at the moment, you know, if you think that the UK can't

7:25

turn fast, look at Japan. Which

7:27

looked absolutely miserable for so long,

7:30

so long, so long, so long, and then suddenly

7:32

you're making ten percent a year on it, you know, when it

7:34

turns, it's very quick.

7:36

Yeah, it is quick. And I mean, I

7:38

mean that Pew point thing was actually quit and I

7:40

hope not because it's something like nearly

7:43

a tenth of them market

7:46

by value just basically disappeared

7:48

last year, and not

7:51

in falling places, but in transactions,

7:54

which is I mean necessarily that's a lot. I

7:57

mean, in some ways, the whole of the UK mark

8:00

is looking like you know, an

8:02

investment trust, the sense of rundown,

8:06

you know, and they

8:08

can't realize the actual value

8:10

of the assets in this massive fund

8:13

and therefore they're just getting you know,

8:15

noble or chewed up. In other ways,

8:18

Yeah, it's empting though.

8:19

They do pill and you have a little list of things

8:21

that might break the cycle. How

8:24

do you get fun flow up? What can break the cycle,

8:26

And they have a list of them. Increased upset by retail

8:28

investors that if a British icera appears,

8:30

or there's some change to capital gains tax or a change

8:32

the dividend tax on UK shares, those

8:34

things don't seem that likely do They Changes

8:37

and allocations by pension funds and insurance companies

8:39

thanks to government and the centivization and regulatory

8:41

change I do enable a greater focus

8:43

on performance rather than risk iming. That may happen,

8:46

not necessarily in a way that you and I would approve

8:48

of, but it may happen. An

8:50

increase in share buybacks, which may

8:52

well happen when valuation is very low and there

8:54

is this tax difference between capital gains and dividends

8:57

makes sense that you might see share buybacks

8:59

going up. And then of course there is the thing that

9:01

we've been going on about for ages.

9:03

Would it be possible to cut the

9:06

UK level of stamp duty relative

9:08

to other markets? It's incredibly high loights

9:10

for other markets don't have a stamp duty on equity

9:12

transactions at all. We do, and not low

9:15

either. Changing that could be a

9:17

real change, And of course once something changes,

9:19

you may be goin to see the flows done around.

9:21

Then then, as I say, it could happen very fast,

9:23

both of the small caps and for the poor old foots

9:26

one hundred Yeah, I.

9:27

Mean teaching stamp duty and shares seems

9:31

like a no brain. I mean, it doesn't

9:33

it doesn't raise that much overall,

9:36

and it's like it's not even some

9:38

you'd really struggle to make political capital oity

9:40

of that by saying, oh, you know, you're

9:43

it's like a tax book for director. I mean,

9:45

really isn't you

9:47

know? I don't really see why we still got it.

9:50

It's really quite a stupid

9:52

tax.

9:52

Well, because you know something is something rich people?

9:57

Yes, that right, So

10:00

there you go, everybody fifty one hundred.

10:02

Maybe it's his birthday this week, maybe it's his birthday

10:04

in a few weeks, who knows, but either way, it's

10:06

time to have a good look at it. I think both John and

10:08

I have written about that, and so has John authors. So

10:11

you know, get to Bloomberg and start reading those things.

10:13

Now, John, we promised that we would from

10:16

Mary to have how many weeks ago, was to have a

10:18

personal finance tip every

10:20

week? So what

10:22

is it? Compatient? It's on you

10:25

because I haven't got one.

10:26

Well, I know that this was a rash decision on apart,

10:29

but no, I just every knew the

10:31

Karden shuance for the and AFT. It's gone up

10:33

an awful lot.

10:34

He's not telling you about the crashes.

10:37

I'm not going to even go there. It's

10:41

gone on an awful lot and it's not entirely my

10:44

fault. I would say, yeah,

10:46

get go in the compartison, say it's

10:48

whenever you're renewing j shuance this year.

10:51

Sometimes it's not worth bothering

10:54

with and you may find

10:56

that you know when you go on it that there's nothing

10:59

there. But I would suggest doing

11:01

it because if you can cut the policy,

11:03

insurance is actually going to be watered this year because

11:07

coun shurance and potato has going up a lot, partly

11:09

because you know, infleetion card parts

11:11

in fleetion in card places, that sort of thing.

11:14

So yeah, and do it in good Yeah, now

11:16

I would am I actually did it be two days to spare

11:19

this team for once, which is

11:21

actually just about enough. But doing do it the day

11:23

before he did.

11:24

Your taxes in such a good time as well. Welcome

11:29

to Meren Talks Money, the podcast in which people

11:31

who know the market is explain the markets. I'm Meren

11:33

Sunset Web. This week I look at Saxo banks

11:36

out rageous predictions for twenty twenty four. Steen

11:38

Jakobsen, Saxa's chief investment officer, joined

11:40

me to walk through the eight strange predictions

11:43

his team has for this year. We started

11:45

our conversation unpacking this particular

11:47

outrageous prediction the US will

11:49

usher in the end of capitalism

11:52

with tax free government bonds.

11:55

So I think a lot of people would actually argue, we already

11:57

killed capitalism and there's nothing left to capitalism.

12:00

Because, of course, if you look sort of from a

12:02

free market perspective, you today,

12:05

as you and I talk, we have Japan, the world's

12:07

third largest economy, have

12:10

no price discovered, so the upon market has

12:12

come to a standstill. There's no bid an

12:14

office going on. There's really owned the government

12:16

that regulates the price, which

12:18

to some extent feeds into other

12:21

assets in the case they are in the k But

12:23

let me take you through the argument we're doing here, and is

12:26

very much relates to twenty twenty three.

12:28

I think it's probably for the first time in our career,

12:30

the two of you to us that people

12:33

are putting question marks on the

12:36

US debt and its ability

12:38

to be refinanced. So

12:41

you know, in economics, fly Lingo, we

12:43

have a stock problem, which is the size of

12:45

the debt, and we have a flow problem, which

12:47

is the ever increasing new issues that we

12:49

see clearly the reason we hit

12:52

five, twenty five, thirty five

12:54

thirty in the ten year was that the market

12:56

simply said, en office or not, we cannot

12:58

continue to finance it. So if

13:00

you can look into twenty four and there's

13:03

already a schedule for issues of dead

13:05

in the US, it's very, very very

13:07

rich, even compared to high issues

13:10

this year. In other words, there's going to be more demand

13:12

on your money, the investors' money. And

13:15

if you extend that sort of argument and

13:17

saying okay, if the government is going

13:19

to mitigate and create an additional

13:21

demand, maybe the one of the things that

13:23

go ahead and do is to make it tax free

13:25

or tax deductible in terms of these

13:28

earnings. And if you do do that, what

13:30

is really happening. Let's assume we have a primitive

13:33

economy, there's only fixed income and equity

13:35

market. If you from the government

13:37

saying okay, you can have a return tax

13:39

free in bonds, which everything

13:42

being equal, even with prices going nowhere

13:44

is forty five percent, that equates to

13:47

with a fifty percent tax to eight

13:49

to ten percent return pretty much

13:52

risk free against the stock market, which is

13:54

ended the year at an all time high. What that

13:56

will mean to us is that the amount

13:59

of capital going into the debt

14:01

financing of the public sector will

14:03

increase in sight and scope, and

14:05

as such, of course that will take away money from

14:07

the smaller but far

14:10

more appealing, at least to most investors, equity

14:12

market. And if you do do that, of course

14:14

you are similar to what is happening in Japan. You're

14:17

really disrupting the price discovery and

14:19

the government is continuously having

14:21

a more heavy hand in terms

14:23

of the running of the economy.

14:25

So isn't that just an extreme kind

14:27

of financial repression?

14:28

It is, it is, That's another word for it.

14:31

But I think the end of capitalist is a better

14:33

headline because we actually need to discuss whether

14:35

we know. But I mean, you laugh, but think

14:37

about it. We are in a situation where regulation,

14:40

vokeness, the eesg,

14:43

all of the frameworks that sits

14:45

outside the actual clearing of prices

14:47

in the market is getting bigger and bigger. When

14:50

I started in banking as a trader,

14:52

for every one trader like me, there

14:54

was about one and a half person in back office

14:56

and regulatory people. Now, as

14:59

I said, actually I'm one trader and I

15:01

have about twenty five thirty people. If I have to

15:03

leave the organizational chaugancy. So

15:06

you know, the hand of the government is just getting heavy

15:08

and have it and most of its

15:12

ability to actually help the individual investor

15:14

or making the market a better place is actually

15:17

going the opposite way in terms of liquidity for the

15:19

market.

15:20

Okay, And so basically

15:22

your point is this inability to discover

15:25

prices in the correct way that tells

15:27

us that capitalism has come to an end and we now

15:29

have basically government run

15:31

economies that we're getting close to that point.

15:35

Exactly. And you know, when you and

15:37

I went to school university,

15:41

we learned one of the few principle that actually

15:43

works in economicsists that the marginals

15:45

cost capital has to be lower

15:48

than the marginal cost market we return

15:50

on the capitol, and if you force the

15:52

government hand higher, we know that the government sector,

15:55

both in GDP terms but also in absolute

15:57

productivity terms, is far less efficient

15:59

that the in the private market.

16:01

Yeah, okay, Well, I think

16:03

we might leave that very depressing one there

16:07

and move on to one of

16:09

your predictions

16:12

that seems to me to be something of a triumph

16:14

of capitalism, certainly a triumph

16:16

for the corporate world, and headline

16:19

for it is world hit by major

16:21

health crisis is obesity. Drugs make

16:24

people stop exercising. Well,

16:27

so you know, people were very keen on processed food.

16:30

So the corporate world may pile the processed

16:32

food. We ate all the process food, and then we're

16:34

like, go, I really want to be fat. So the

16:36

pharmaceutical giants have managed to create

16:39

a drug that will mitigate

16:41

the effects of eating the food that they created

16:43

in the first place. Good thing or bad

16:45

thing?

16:48

Yeah, that's the really what we ask you, and

16:50

I'll be very interesting in your personal

16:52

opinion, but let me take you through the argument

16:54

here. What we're really

16:56

asking you is, as an

16:58

investor and as an individual, is

17:01

it a society you want to live in

17:03

where you can buy a pill and then you don't have

17:05

to be responsible

17:08

for the action of your life?

17:10

One?

17:10

Two don't we risk if

17:13

we allow a pill to be part of the

17:15

healthcare treatment

17:17

of obesity that we in

17:20

the process is doing people at this favor?

17:23

One because the social mobility everything

17:25

being equals should be reduced. So, in other

17:27

words, people who already do not have access

17:30

to spoiling

17:32

equipment at home or even a

17:34

gym membership, People who have

17:37

to work two jobs to make

17:39

instant meat. People

17:41

who have no ability to go down to the local

17:43

football club, the golf club, are going zoomba,

17:46

dancing or in any other shape or form

17:48

sort of be part of society. If

17:50

we allow these people to be able to sort

17:53

of have a lower hearder rate

17:55

in terms of feeding themselves, in terms of eating

17:57

junk foods and everywhere with no consequences,

18:00

I think we end up in a situation where we

18:03

are really not helping

18:05

the course, we're making it worse. Also, do

18:07

remember that all of the tests so far have shown

18:10

that as soon as you're off the pill, you

18:12

will put on the same amount of weight that you had

18:14

the shred. So, in other words, this pill

18:16

is either for lifetime or it's it's

18:19

something that you need to a bed and all together and

18:21

really takes responsibility for your own life.

18:24

The other sort of part

18:26

of the equation here is the healthcare sector. The

18:28

obesityitor eight in the US is closing

18:30

in on fifty percent of the population in Mexico

18:33

is above sixty. So if you sit there

18:35

in a utility function being a health

18:37

official in those countries, of course

18:40

you're going to argue that you know, maybe this

18:42

pill right now is marginally too expensive

18:44

to work. But if the price came down by

18:46

fifty percent or eighty percent, maybe this is

18:48

the way we're going to move forward. We're going to

18:51

prescribe this to most people who are bees

18:53

in the net process. We're going to reduce the coded

18:56

cost of the healthcare system. I personally

18:59

and now be in you view, but I

19:01

personally think that you know, of course

19:03

the obesity drug interns of the cogitive

19:06

Escuer impacts has had as positive It's

19:09

very costly though, and as you say, the triumph

19:11

of capitalism here being that the valuation of

19:13

these stocks is extremely elevated,

19:16

and really, in all

19:18

things to be fair, they're really priced the next

19:20

ten years to perfection, so

19:23

much so that most people, in

19:25

order to justify free his price will have to see,

19:28

especially in the US, that the healthcare carriers

19:31

will have to actually support this

19:34

being under the insurance rate. So you

19:36

know, and if that does happen, of course there'll be access

19:38

to on it. Probably the production will follow, so

19:41

everyone expected to be on the pill cannot be on a

19:43

pill. And all of a sudden you see McDonald's and coke

19:45

consumption go through the roof, which is

19:47

really our provocative call here.

19:50

I'm slightly more optimistic about these drugs

19:53

than you are, I think. I mean, I look at it, and you know,

19:55

people always say, well, people have to stay responsibility

19:57

for their own lives, and people should each better, and people

19:59

told ex size more or whatever it is that

20:01

you want to say. But we've been saying that for

20:03

decades, and the obesity rates go up and

20:06

up and up and up and up. So at some point we have to accept

20:08

that it's not going to happen unless

20:11

we do something extraordinary and incredibly

20:13

undemocratic to the food industry.

20:16

It simply isn't going to happen that fifty

20:18

percent of America is going to go Why I'm overweight and I'm

20:20

going to take control of my own life by changing the

20:22

way I eat and the way I exercise, because you

20:25

know, the diet, the diet look at the diet book industry.

20:27

Right, if it was possible for people to want

20:29

to take control of this stuff and then

20:31

to take control of it, that industry wouldn't

20:34

even exist. So I look at it slightly

20:36

differently to you, and I do buy the idea

20:38

that if you could get a cheaper

20:41

version of this drug into the hands

20:43

of the large

20:46

percent of the global population that is obese.

20:48

Then you do do something amazing to

20:50

the health profile of the global population. And not

20:53

only that, I don't know if you've been following it recently,

20:55

you can see that these drugs also

20:58

change people's addictions to things.

21:00

So they saw people drinking alcohol,

21:03

they seem to have an effect on people's drug

21:05

intake. Now imagine imagine

21:07

a world without addiction. What would that look like?

21:10

It's value read it. What I'm

21:12

hearing is that you're very assisted.

21:14

You're really giving on on humankind. You're

21:17

really giving up the ability of people to control

21:19

their own destiny, which I think very much is

21:22

in line with both the political

21:24

climate but also the accepted sort

21:26

of consensus the narrative of the world.

21:29

I think definitely. I really think the first derivative

21:32

here would be a massive lack of social

21:35

social ability to climb through the ranks.

21:37

If you can't afford it already and you're going to get a pill

21:40

you were sentence to actually move of it, it's going

21:42

to get worse. So to me, it's an

21:44

acceleration. And in terms of the addiction

21:46

to drugs, it's kind of funny and I should

21:48

be careful how I phrased it. But none of my

21:50

clients has been on the drug has actually complained

21:52

about the fact they lost their social life while being

21:55

on it, because simply the ability

21:57

to take a drink and go out for a bottle

21:59

of wine or a beer and going

22:01

after dinners was actually all but disappeared

22:04

for them. So I'm not sure.

22:06

I think the truth is somewhere between your

22:09

what i'll call, you know,

22:11

pessimistic and my pistimistic

22:13

in your view view of this, but we

22:17

are not going to be predicting. We're just saying,

22:19

you know, there is a first derivative and a second

22:21

derivative on this so called miracle

22:24

pill. We don't think it's a miracle pill. We

22:26

think it's another addition to the

22:29

way of life along the lines of

22:31

what you just argued. People will not be

22:33

able to change their life, and hence this

22:35

is going to end up with less social mobility, is going

22:37

to end up with people more people getting a bees,

22:39

not less, but shorter

22:41

term.

22:42

Shorter term. If an awful lot of people take it, let's

22:44

say ten percent of the abast people in the US

22:47

take it, that's going to have a knock on effect to the

22:50

alcohol industry, to the fast food industry,

22:53

the process food industry. Absolutely, so

22:56

you know we've been I wrote a

22:58

few months ago about the effect of it have on the fast

23:00

food industries when I saw I saw how much

23:03

less pizza people ate once they started

23:05

taking the drug.

23:07

No, no, I mean it's

23:09

pretty clear. But I think when

23:13

we do these a ragious prediction. Of course, what we're trying

23:15

to force is a non linear concept.

23:19

So and I would argue, with no

23:21

disrespect, that you are giving me

23:23

a liner version of it. So there would be a mojor

23:25

reduction in consumption of alcohol, production

23:28

of McDonald's meals being served. I'm

23:31

saying that the wider consequences here is that

23:33

you lose social mobility, You lose

23:36

the ability to actually address the fact that

23:38

people need to be accountable. I would say, from a

23:40

physical government point of view, what I want the world to

23:42

do in terms of that, in terms of healthcare,

23:45

in terms of support for constitutions

23:48

around the world, all of these

23:50

aren't you attack. But the only thing we do do is

23:52

to accept that it's going to

23:55

get worse.

23:56

I would like like you to think that

23:58

there were rational, straight forward

24:01

solutions to things. I would like to think that, for

24:03

example, back to debt, we've bet more careful

24:06

around our data in the UK and

24:08

in the US, that we could spend less, that we could manage

24:10

our public sectors on less money. And I'd like

24:12

to think that we could sat that the obse

24:15

of the developed world would be able to change their behaviors.

24:17

But one thing that you and I both know already is

24:19

that that isn't happening, hasn't

24:22

happened for decades, and it's unlikely

24:24

to happen, So surely all we can do is

24:26

mitigate it.

24:29

Yeah, I just acknowledge that we are

24:31

in the final inning of a pretended extent.

24:33

I think twenty four very much, because it's a very

24:36

very clear election cycle that

24:39

everything's going to be way even

24:41

worse in twenty four. But I think ultimately

24:43

the way and the evolution both economic and socio

24:45

economic factors happens is

24:47

that we test this to the limit. Basically,

24:49

we break systems down to rebuild

24:52

them. So I think we are in the final

24:54

inning. Not just outrageously calling

24:56

on that, but I think we're in the final inning of a

24:59

world where we are moving

25:01

towards the end game. We are in

25:03

baseball analogy, we are probably in the middle

25:05

of the ninth inning, not even at at the top

25:07

of the ninth inning, and I think in twenty four

25:09

we moved to the bottom of the ninth inning because

25:12

all the elections that we see in this year, in the election we're

25:14

going to see next year is going to be about anti stashment

25:16

and going away from Actually, like

25:18

you say, it's going to get worse. The accountability

25:21

on both political parties but also

25:23

central banks and the individuals is going to be less

25:26

strenous, less demanding, and as such,

25:28

we're going to end up in a position where we're actually going nowhere.

25:31

So what happens in the endgames?

25:32

Team in the endgame,

25:34

we end up with more beast people on the pill. We

25:37

end up in a situation where where ultimately

25:39

the US has to introduce YCC similar

25:42

to what Japan did. And I think

25:44

we discussed this before.

25:45

You and I would you mind just explaining why

25:47

cecil clup control for one non experts.

25:50

Yeah, So what YILCA control means that the

25:53

government and in this case most

25:55

likely the Center Bank the

25:57

finn Minister Finance, dictates what

25:59

the price of money should be. So there's

26:02

no ability to rate to move up and down

26:05

dictated by the market, which creates

26:07

an artificial stimulus to the company to

26:09

what we've seen in Japan. And the point I'm

26:11

trying to raise is that everything the Bank Bank

26:14

of Japan and Japan has done over the last fifteen

26:16

years has been repeated by the Western world

26:18

inside five to six years. So

26:21

as often as as we criticize the Japanese for

26:23

what they're doing, we have continued to do everything

26:25

they ever done, including QE, which

26:28

was initiated of course first many years

26:30

before the Western world in Japan.

26:33

So I think we know the future. We can just look

26:35

to Japan and that it's a standstill

26:37

economic model. Social

26:40

mobility again very low. But the fact

26:42

is that Japan can afford it. Most of these

26:44

countries that come into this new crisis, or the

26:47

Japanese versus like the US, cannot afford it.

26:49

So something needs to break, and something is breaking already

26:51

politically in my opinion, and that's what the US election

26:53

about in twenty four and ultimately

26:56

we will have a new capital structure and re

26:58

engagement off the market, say distributary

27:01

of goods. But we are one two years away

27:03

from that breaking point. But we move towards it,

27:05

and right now we're celebrating lower rage. We're celebrating

27:08

that the inflation just seems to have gone

27:10

by the wayside. But underneath that is

27:13

that we are still imbalanced on

27:15

energy, energy sufficiency, cybersecurity,

27:18

defense spending, social

27:20

programs, as we just discussed. So the imbalance

27:22

is just increasing. It's like a pyramid which is standing

27:24

on his head instead of on a sort

27:27

of the wider, wider part of the pyramid

27:29

itself. So it's in control

27:32

right now, but it's escalated to aalks higher

27:34

volatility.

27:35

Okay, well, let's stick

27:37

with the twenty twenty four presidential

27:40

election, and another of your outrageous

27:43

predictions is that Robert F. Kennedy

27:45

Junior may win that election. Now

27:48

here's the extraordinary things, Dean, which

27:50

is that last week's guest said

27:53

that Robert F. Kennedy Genior will change

27:55

the conversation around the elections such

27:57

that we don't see either of Biden or

28:00

Trump presidency. It took us through how you see

28:02

that conceivably happening.

28:05

It really comes from the success we had in calling

28:07

Trump winning over Clinton and calling the

28:09

Brexit, which has nothing to do with our intelligence

28:12

or our ability to predict the future. But we did

28:14

realize in both cases that

28:16

missus Clinton was the most unelectable

28:19

person ever in the history of US elections.

28:21

There was no way in hell that there she was going to

28:23

be voted into office, which means which

28:25

meant that Trump was more likely than not actually to

28:28

succeed simily. As you very

28:30

well remember yourself. The Brexit campaign,

28:32

the Yes campaign in under the Brexit was

28:35

really talking down to people. They were really

28:38

thinking that the UK voters

28:40

were stupid, you know, coming up with numbers

28:42

like you're going to lose and thirty

28:44

three pounds over the next ten years. And

28:47

this is the same people that can't predict the interest

28:50

rate in the next three hours. So they

28:53

sort of lost it and became an anti Steppens

28:55

vote. It was never about the EU in my opinion. If

28:57

you fast forward that to twenty four, you have

29:00

on one side a president which

29:02

in the consensus of the market not

29:04

my saying, but is anti democratic.

29:07

He's actually in court fighting

29:09

the claim that he is anti democratic. And

29:11

you have a president who are more likely than

29:14

not to die on wilt while in

29:16

office or at least

29:18

connective chief disabled,

29:21

someone that's probably

29:23

thirty percent of the vote on each side, which is fixed

29:25

before we start the election, which means that forty percent

29:28

is undecided. Into

29:30

the mix comes a royal name in the

29:33

US, maybe not to the young people,

29:35

where I think Kadashian is more famous than the

29:37

Kennedy family, but I think the Kennedy

29:39

family comes with a royal brand, and

29:42

as someone as a candidate,

29:44

as you probably discussed last week, as well, a candidate

29:46

who is actually for everything. He's

29:48

not against anything except war,

29:51

which he wants to reduce the US role in the

29:53

in terms of the global policing

29:55

they do. He was an

29:57

anti vaxxer. He was very

30:00

much looking for electoral reforms. He

30:03

is very much a guy who wants to go up against

30:06

the pharmaceutical and the healthcare

30:08

system. As we discussed earlier. He's

30:11

a person who is populous in

30:13

every shape or form that you can imagine.

30:15

There isn't really if

30:17

I'm a bit harsher, if I'm an economist or

30:20

even a social economist,

30:23

I don't think there's really a lot in the program.

30:25

But the thing is he is less hated.

30:28

He's less not light than

30:31

Biden and Trump. I mean Biden and

30:33

Trump has their own candidacy. But I

30:35

can easily see that, similar

30:37

to your guest last week, that at a bit minimum

30:39

he becomes an impact. He will definitely hurt

30:42

right now Trump more than he's going to hurt Biden

30:45

because he appeals to the crime same awards.

30:48

And secondly, you know, the

30:50

last time an independent ran with some success

30:52

was Josh Wallace in nineteen sixty seven. If

30:54

I'm not mistaken, he got to twenty eight percent of

30:56

the vote. Similarly, when Clinton

30:59

won on the Austro Rusburiold only talied

31:01

about eight nine percent in the vote, but

31:03

it was enough to actually put Clinton in the seed

31:06

and d Seed and Detrow Bush

31:09

the first. So you know, these

31:11

guys that come in from the part and independently can

31:13

play a role. He is a national name because

31:15

of his name Kennedy, and he is not

31:17

someone that people feel is

31:20

part of the establishment. And I think the US

31:22

election, the upcoming UK election, the European

31:25

European Commission election, EU

31:28

election that comes up, and all election that

31:30

reached back during twenty four I think will be driven

31:32

by one fact that one factory only. It is

31:34

not going to be on people selecting

31:36

who they think is the right person to be

31:38

in office, they're going to de select everyone

31:41

else first before they get to their candidate. And

31:43

that is very much in line with what we saw

31:46

in the Netherlens, very much in line what we saw in Brazil.

31:48

What if in Argentina? And I

31:50

think continuously through this phase

31:53

of a pretended extent into the

31:55

final inning here, I think that is the

31:57

driver. People are not voting for what they want,

32:00

voting for what they do not want, and that

32:02

is far easier for people to define because that could

32:04

be one single thing that they

32:06

are anxious about.

32:08

Okay, So if you were to make a non outrageous

32:11

prediction about who would win the presidential

32:13

election, who would it be.

32:16

Biden? Simply because I

32:18

think the power

32:20

of the Kennedy name is enough to take enough votes

32:23

away from from Trump.

32:24

From Trump, so the most likely result

32:27

is another Biden presidenc

32:29

Here. It seems extraordinary, doesn't it From the outside.

32:32

It does, And it's

32:35

a classic case of what I just outlined.

32:38

It's not because people vote for him, it's

32:40

because, in this case, two other candidates

32:43

is perceived to be worse. And the UK

32:46

election, it's tricky because

32:48

of the the electional system in

32:50

the UK, where I think really the key

32:54

component is the Scottish vote, with I

32:56

think, if I'm not mistaking it's fifty five

32:59

votes. I think they can really make

33:01

a difference, and they're probably going to swing more

33:03

toy than the overall national

33:06

polls shold right now. So I think it will

33:08

be a Labor win, but I don't think it will

33:10

be outright as good as people expect,

33:12

simply because the way you have

33:14

constructed the election system in the UK

33:17

so to some extent, too

33:19

many people will be anti labor

33:22

for its history and whether

33:25

it's based in rational or our

33:27

thought process is not, it's

33:30

really relevant. That will be specially

33:32

interest that will play a key role.

33:34

It's interesting, isn't it that, going back

33:36

to Scotland that the SMP over the last

33:38

decade or so I've managed to convince everybody that

33:40

Scotland is a uniquely progressive

33:43

and left wing society, whereas in fact

33:45

it's just split. If you take

33:47

out the SMP, it's just a

33:50

split in that kind of sense is the rest of the

33:52

country, and that.

33:54

Is exactly the point and very

33:56

much vested in actually being part

33:59

of the UK and not be independent, which

34:01

of course, but you know as well as

34:03

I do. Fact doesn't matter in today's world.

34:06

They will matter again one day, right,

34:09

Let's go one day, one

34:11

day. That's what you're worried about. Exactly. Let's

34:13

go back to we were talking about yield

34:15

curve control, and we were talking about about Japan,

34:18

and you make a great prediction

34:21

here that Japan will have a seven

34:23

percent GDP growth, which you call lucky seven

34:25

GDP growth, and that is

34:28

going to force the Bank of Japan to abandon a

34:30

real yield yield

34:32

curve control, which you just call it y CC. It's

34:34

easier. How's that going to work?

34:39

Yes, I'm just back from Japan, and it's

34:41

pretty clear to me that given

34:43

the opportunity, Bank of Japan and the Ministry

34:45

of Finance in Japan will slow walk the

34:48

normalization of the interested policy in Japan.

34:50

They can simply afford to pay

34:52

the market price. You know, with wages

34:55

at four percent and inflation at three

34:58

you know, the real race in Japan should minus

35:00

three hundred base point, it should be plus one hundred

35:03

or two hundred, and it's not happening.

35:05

Why it's not happening because of this year control.

35:07

So the artificially low industry Lucky

35:10

seven addresses the fact that the number seven

35:12

is apparently a lucky number in Japan, So

35:14

we sort of provocatively said, how about

35:16

if phenomenal GDP reaches seven percent because

35:19

of these negative real rates they have, makes

35:23

you know, the economy overheat very start

35:26

to rise, which they already have done. And

35:28

on top of that, I think Japan plays a pretty

35:30

central role in the re calibration

35:33

of the semiconductor

35:36

industry. It's pretty clear that everyone

35:38

on needs to, needs and wants to get out of Taiwan

35:40

over the next ten years. One of the few

35:42

places where you both have the technology and

35:45

the internal the logistics to

35:47

do that and replace it is in

35:49

Japan. So your trend is on top of being

35:51

a top of the class in automation and robot

35:54

they're also now increasing seeing these heavy

35:57

investments into factories

35:59

and semiconductor related industry.

36:02

So I think Japan could see a very big

36:04

headline number which is asynchronic to the

36:06

rest of the world, probably twenty four. That will

36:09

put pressure on the upside on the

36:11

interest rate in Japan, and I think

36:14

as an outrageous call, but also as a real call,

36:17

the biggest single event risk

36:19

we can look that we know of in

36:21

twenty four is actually if YCC

36:24

is a bandonba banka Japan, that will increase

36:26

the norminal interest

36:29

rate in the world buy anywhere from

36:31

twenty five basis point to a full percenter's

36:33

point if they let go. Because you

36:35

know, as you know, Japan is the biggest marginal

36:37

buyer of debt in Europe, in the

36:39

DGZ countries and in the US.

36:42

Okay, So should we manically buy Japanese

36:45

assets?

36:45

I think you have. You know, you

36:48

have better than a fifty to fifty chance that your

36:50

currency rate is going to be pulling for you

36:52

and filling truly heavily. So it's a little

36:54

bit binary. Either you're going to make twenty

36:57

five percent of the currency or you're

36:59

going to make a decent return

37:01

on just only the assets for the balance of a year

37:03

until they remove the

37:06

slow walking and started running to abandon

37:08

it.

37:09

Okay, So we can be bullish on can

37:11

we be bullish on Japanese equity markets as well

37:13

as bond markets?

37:14

I would say bond market I've given up on,

37:16

and I think every international rest have

37:19

done the same. But I would say I'm definitely

37:21

into a market which is running as hard it is

37:24

right now it would not be a silly idea to buy

37:26

at yin calls against the dollar

37:29

as a protection. It's probably a much better protection

37:31

than buying a put on the stock market, because if

37:34

Japan becomes the catalyst for change

37:36

in the monetary outlook, it

37:39

will have severe impact on the currency rate, and

37:41

to the extent that dollar in properly should

37:43

trade one hundred and not

37:46

where it is today at one forty one.

37:49

Right, what next from your outrageous

37:51

productions, Let's see oil at one fifty.

37:54

That's kind of interesting. How does oil get one fifty

37:56

in today?

37:56

There? Over the last

37:59

few days we see in that Unfortunately,

38:02

the Middle East crisis seems to be opening

38:05

on other borders

38:07

as well. There's been a dire warning

38:10

from Israeli towards his father

38:12

in Libanon. We have also

38:14

seen that apparently the security

38:17

apparatus now is telling Hamas

38:19

out right, that's serialy, what happened

38:21

after the Olympics in nineteen seventy

38:23

two. We're going to go after, go after every

38:26

single person who's in the leadership of

38:28

Hamas, wherever they are in the world. So

38:30

I think there is an escalation of the rist

38:33

premium potentially in terms of the Middle East. On

38:35

top of that, I think the OPEK is very unhappy

38:37

about their inability

38:40

so far to actually to get the market set

38:42

that they are reducing production. Obviously

38:44

the market is skeptical because the compliance

38:47

is pretty low. And then you

38:49

know, the third one, which is probably more positive

38:52

one is that if we believe all of the interest

38:54

rate that the market cuts, that the market is pricing

38:56

in, we could potentially look at ACCE raising

38:58

in the second half of next year, both on on inflation

39:01

but also on the on the growth

39:04

side after seeing a pretty poor first

39:06

half of twenty two twenty twenty

39:08

four. So so I think, you know,

39:10

if we go as deep as icepect

39:12

and indust rate, I think that there will be some stimulus

39:15

the impact coming from.

39:16

That, okay. And then the

39:18

saudis by

39:21

the the

39:23

Champions League champion leak

39:26

exactly because

39:29

I mean, it's.

39:29

Easy, it's

39:32

easy to understand why, I mean, FIFA is off

39:34

for everything that has to do with money, right. I don't

39:36

think I'm going to get a get sued for saying that,

39:38

but but but you

39:41

know, let me take the through the story.

39:43

So we know the Live Golf Tour

39:45

was was bought by the Saudis

39:48

and a lot of you know, American golfing particularly

39:50

been asked why why did you join

39:52

the live Tour? I mean it's it's an inferior tour

39:55

in sporting terms, and you

39:57

know, whether you want or not, probably you're sanctioning

40:00

some of the things that go down in Saudi Arabia. And the

40:02

answer bag was very classical and

40:05

what an Ignobank agent to say. They say,

40:07

listen, if someone came to offer you ten times

40:09

for salary and in the process

40:12

making sure that you were made whole for

40:14

the next generation, maybe next three

40:16

generation, why would you take the money? So

40:18

really, again, what we are trying to provoke is

40:21

the thinking is theoretically,

40:23

if the money is big enough, is everything up for

40:25

sale? I think personally unfortunately

40:28

along the lines we discuss a few childel already. I

40:30

think that is the case. There's

40:32

a number of European clubs that if

40:34

Saudi and Fiver came to the masseat,

40:37

why don't we replace the Champions

40:39

League with a format where we

40:41

tripped free, double the price

40:43

money and we make it a little bit more structure,

40:45

you pay a little bit less matches and the final and the

40:48

semi finals will be in the GCC. I

40:51

think they will be gained if nothing

40:53

else, because they will argue simply to the American

40:56

golfers that they have the interest

40:58

of their supporters and their shareholders too

41:01

hard.

41:01

All right? Is that that's slightly outside

41:04

my terms of reference anything anything to do with

41:06

football. But I'm glad we covered that one. Glad

41:08

we covered that one. How can we move

41:10

on though, to AI?

41:14

This is an interesting one. Then

41:16

tell us your predictions or sorry, outrageous predictions

41:19

around AI.

41:21

What Peter Gannery maigre Danlist did. He asked,

41:24

a very relevant question is

41:27

what would have to happen for us

41:29

to give guardrails to AI

41:32

or to stop the progress into

41:34

infinity and the user of the And

41:37

he came up with the answer, which I think is very classical.

41:39

He said, there needs to be a national

41:41

security incident for this to

41:43

be stopped. In the process, we know the EU

41:46

Commissioner government will not be able to do it.

41:48

First if I need to find the political mandate, and

41:50

then the execution is difficult. But imagine,

41:53

and this is just imagine, but imagine the National

41:55

Security Advisor was caught

41:57

on video and on tape and release

42:00

emails delivering information

42:02

in a restaurant in Paris to

42:05

his counterpart in China. None

42:07

of it being real, but all of it done so

42:09

well in deep fake that it

42:11

would be very very difficult for the National Security

42:13

Agency and others to figure out what was

42:16

really going on. That would of course raise

42:18

the alert with them, and most likely

42:21

are not They will say one or two things first

42:23

that will immediately put a ban on O

42:25

MAYI and Microsoft and everyone else to

42:27

share their databases outside the non

42:30

compliant parties that is not approved by the

42:32

National Security Service and Natural Intenergen

42:35

Service. But on top of that it raises

42:37

and you know, the positive impairing of deep fake,

42:39

of course being I had my Dutch colleague

42:41

the other day sent me an analysis in

42:43

Danish. He doesn't speak Danish, but of course he used

42:45

one of these AI deep fake

42:48

things. And so the positive

42:50

age bag is you can do it, and you can create sort

42:52

of translation and vite

42:54

material. But the deep fike

42:56

is that we know it goes on already.

42:58

I mean, imagine what goes on in terms of intelligence

43:01

service in terms of deep fike, they said, and the other so

43:03

I think this is a real call. The only way we get

43:06

controls on AI is nice and security

43:08

breaches.

43:09

That isn't particularly good for the AI

43:12

industry and not good for the

43:14

bubble, for the stock prices, etc. Suddenly

43:17

that's exactly the kind of thing that we'll

43:19

destroy that bubble.

43:20

Absolutely, and we are not saying is happening,

43:22

and we're just saying that deep fake in our opinion

43:25

is to think a bigger risk for this

43:28

potential.

43:28

To have it all right. The

43:31

last one that I want to ask you about, because I mentioned

43:33

in this one is luxury demand collapsing

43:36

as the EU goes robin Hood introducing

43:38

a wealth tax. And it's interesting

43:40

we haven't heard as much about wealth taxes over

43:42

the last year or so as we did

43:44

in the previous few years when there was endless conversation

43:47

about wealth taxes in across

43:49

the EU, in the US, and also we talked a lot about

43:51

wealth taxes here, but it's a conversation that's slightly

43:54

petered out. So I'm interested

43:56

to see it coming back here in terms

43:58

of a wealth tax on luck good And

44:00

there's been also lots of conversations of course about you

44:02

know, putting a higher rate of VAT on luxury

44:04

goods. So how do you define luxury? Will never quite

44:07

know which is the same kind of idea.

44:10

It's a great catch you have on it

44:12

being less relevant in the

44:15

narrative last two years, and I think that's simply because

44:17

the fiscal dominance was allowed to run. And

44:19

don't forget, a wealth tax sits

44:22

below one jealousy as

44:25

a psychological phenomena, but it

44:27

also sits behind sort of the published movement.

44:29

Where a government is coming up short on tax

44:32

receipts, the best way to make

44:35

a most variant citation mark way

44:38

of reigning in some more tax re

44:40

seed is to go out to the wide department and say,

44:43

listen, we're going to go after the rich. And what is

44:45

kind of super ironic is that Norway right

44:47

now is acting more like a communist country

44:49

than the richard country in the world. As

44:52

you probably know, Norway introduced a welfare tax

44:54

which made I think about two fifteen

44:57

hundred of the richest people leave the country. It's

44:59

really unitative and maybe

45:01

that is the maxim that only

45:04

only the risk can afford to be socialists.

45:06

That is playing out. But the but

45:08

the story here simply is, I mean, if

45:11

we narrow it down, it's really government coming off

45:13

short on tax receipt. What is the easiest,

45:15

most popular, with the least amount

45:18

of voter impact, maybe even with a positive

45:20

voter impact. That you can do is of

45:22

course, to tell the ninety nine percent

45:24

quartile, we're going to tax the rich more. The

45:26

great irony being there is zero tax

45:29

revenue relevant in doing it. But it's

45:31

of course something that is perceived to be doing

45:33

something. Again in citation mark

45:36

fair.

45:37

Yeah, and only the rich pay, and nobody

45:39

thinks that they're the rich somebody else who pays

45:41

as tax exactly. But

45:43

two percent is quite high, and

45:45

it's enough to make people want to move very

45:48

quickly.

45:49

I mean, it was at half a percent, and now is

45:51

that the two percent? And if and the problem

45:54

is that welfare tax is kind of unfair.

45:56

If you don't realize any money, you can

45:58

end up as a situation where you where and even

46:00

if you lose money here over year, you have to

46:02

sell some of your assets to keep your assets.

46:05

That kind of doesn't make sense.

46:07

Yeah, it's interesting. I had a guest on a

46:09

little while ago who said that one of the things that they

46:11

never bought was luxury goods companies, not

46:14

because they're worried about wealth taxes, because

46:16

they felt that if you had any

46:18

I to ESG, the

46:20

majority of the large

46:23

clients of the wealth companies weren't

46:25

people that you'd be happy to pop

46:27

under your S. So there

46:31

is not a reasonable sector to

46:34

hold equities in.

46:36

No, I fully concurve it that

46:38

makes sense to you, Yeah, absolutely, I fully

46:40

concur with that. The problem with eesn

46:43

G is no company is all three.

46:45

So depending on whether you go for the S or for

46:47

the G or for the E, you're going to end

46:49

up with very different economic environment.

46:51

I mean, I don't think there's anyone that

46:54

claims that the META is

46:57

very G. They may claim

46:59

they are E, but they are certainly

47:01

not G if you look at their capital,

47:04

and certainly not S and certainly not exactly.

47:07

But nevertheless, if you find an ETF

47:09

that is green or est compliant, you'll

47:11

very often find MET in. So so

47:14

you know, someone needs to explain to me how that works.

47:17

I don't think anyone can. And we're beginning getting

47:19

to the getting to the point where people are beginning to understand

47:21

that, you know, the ESG are and the main in conflict

47:23

with each other, right, and.

47:25

Going back to you, I guess I think the point really

47:27

the super point here is that S and G doesn't

47:30

matter. Is only E that people are interested

47:32

in. We're driving the value of E. But S,

47:34

you know somewhat if it follows

47:36

but gez no one monitors g

47:39

stein.

47:40

Can I finish this conversation by asking

47:42

you about your non outrageous

47:44

predictions for next year, looking into the rest

47:47

of this year, what is it that you

47:49

actually expect to happen? What

47:51

do you see happening in stock markets? For example?

47:54

So as you and I take this, the

47:57

market is full of conversation about the

47:59

central banks, EASYB, Bank

48:01

of England and FED fighting

48:05

the market. The market is saying there will be more cuts

48:07

than the central banks, and a lot of people are telling

48:09

me that they are pricing in too much.

48:12

I actually think this is the other way around. I think it's too

48:14

little. This priced then, because the

48:18

cutting interest that we've seen is really driving

48:20

by a subpar performance

48:22

and inflation, we're still to see the full impact

48:25

on very high for very long. It's

48:27

into the economy. So I expect the

48:29

next sort of thing to happen is

48:32

that we will maintain a low interest rate,

48:34

a lower growth but has become

48:36

int Q one next year, actually real

48:38

rates with the pace of which Favet is

48:41

indicating will rise to three hundred and twenty

48:43

five three hundred and fifty basis point, and

48:45

that doesn't work. So if

48:48

race are going down, they actually going to go down more in

48:50

order to get real rays down to one hundred, two hundred

48:52

and fifty. That will be my number one focus

48:55

on the positive side. On the negative side,

48:57

I go back to Bank of Japan. Whatever Bank

48:59

of Japan will have the outside

49:02

impact on the rest of the world. I don't

49:04

think young people in the market they

49:06

fully understand the full impact on the

49:09

excess saving the assists in Japan

49:11

and finances everything for try finance

49:14

in ships and factories to

49:18

carritories in RN. I mean,

49:20

if that flow reverses back, it's something

49:23

that will impact all of us, whether we want it or not.

49:25

So pretty much more we need to on

49:28

the risksite needs to wake up to every day is checking

49:30

the dolly in rate and comments on the markets.

49:32

But industry going much lower

49:34

than the market expect, and particularly

49:37

now that the market is saying, oh this is too much, A

49:39

wholeheartedly disagree. Actually, I think we need

49:41

far far lower real race in the US.

49:44

Okay, So where should the retail investor put

49:46

their money. Then do you think the

49:48

ordinary investor.

49:50

In the UK is very simple I mean bias much

49:52

of two years and five years until the government

49:54

buns you can the Bank

49:57

of England this week was very slow in acknowledging

50:00

what is going to happen and what will happen. Is that

50:02

because you had so it is some chronic

50:04

reason why you inflation went out, You're going to have the same

50:06

agin reason why it goes down. So

50:08

as we come into sort of all these things running

50:11

out regulatory and framework wise,

50:13

in January February, we would see

50:15

a massive job in interest rate. I would say there

50:17

is a ten percent return which close

50:20

to zero risk in being long the bond

50:22

market. That is for the taking, and I

50:24

think people should be the at least fifty percent of that into

50:26

it. And then you need to address all

50:29

the issues that we just talked about in terms of what

50:32

is the world's short of the world is short of productivity,

50:35

short of real solution to the real economy,

50:37

and find some stock desists in that sector. You'll

50:39

find if you buy stocks that are sensitive

50:41

to the global economic growth rate, you're

50:43

probably a risk. But your first part in

50:46

act year should be pretty okay for investors.

50:48

But I think the best asset is certainly

50:50

risk graded but also also not at risk

50:53

wading it. And I think fixed income is the way

50:55

to play, and it'specially in the UK. Same

50:57

for Europe. Germany needs a significant

51:00

or real rate. You a Jewish

51:02

needs to so whatever wherever you are, but particularly

51:05

for a UK investor, it's pretty clear to me

51:08

they need to be long, long, long fixed in

51:10

cup.

51:11

Okay, Well that is a great

51:14

place to end something, something positive

51:16

and proactive for our listeners to do. Stein,

51:19

thank you so much.

51:21

It's an actual pleasure. And I think I'm the most positive

51:23

person you've ever interview.

51:24

Just for the record, Yeah, you basically

51:26

are. And it's not that positive, John,

51:37

What do you think of Steen? I mean again, we spoke

51:40

to Stein last year, right, And you look at these things and they're

51:42

supposed to be outrageous predictions and you read your

51:44

way through them and you think, well, yeah, that could happen, that

51:46

could happen.

51:47

Yeah, Stein's I mean, Stein's good

51:49

value. And these predictions always

51:52

think are interesting. I

51:54

mean a's always there's a few that I think just won't

51:57

happen. But that are the other ones where you're thinking,

51:59

they said that is quite it's

52:01

quite hard to make that sound outrageous

52:04

without, you know, tweaking some of the language

52:06

to Trump. I mean, the whole thing about the

52:08

one I thought was the and you mentioned

52:11

this in the podcast, but the Robert Kennedy

52:13

thing about him? Can

52:15

I steal in votes from Trump? I mean, Peppa said

52:18

basically the same thing just a couple

52:20

of weeks ago before Christmas, and that one

52:23

feels like quite a high

52:28

possibility outcome.

52:31

Well it is. I mean Astin and I said, you know,

52:33

you look, you look at the current

52:35

candidates for US president, and you think, well, it's

52:37

inconceivable, inconceivable

52:40

that the you know, greatest best dinner Democratic

52:42

Capitalism on ASKUD once again elect either

52:44

Trump or Biden. So something else must happen.

52:47

Surely something else must happen.

52:49

Oh yeah, and I do. I think this. Teine's

52:51

point about people voting against someone

52:54

rather than voting for someone is

52:56

a really good one, and it's really overlooked.

52:59

And I think one thing because lots of people seem

53:01

convinced that Trump's definitely going to win this team

53:04

looming, but they forget that last team learning was up

53:06

against someone even more unpopular,

53:08

whereas if he hadn't been, then you

53:10

know, he probably nineteen then you

53:12

know, maybe it's the same as time.

53:14

Maybe, which brings us on to the end of capitalism

53:17

in the USA. And I did think this was really interesting

53:19

because you know, this is this is possible,

53:22

very possible. The US budget deficit

53:24

is particularly high. The debt

53:27

payments are debt

53:29

payments off the scale nuts, you know,

53:31

the amount of money that has to file out

53:33

into debt payments. So there should be or there will

53:35

be intense pressure to try and demand

53:38

for US treasuries. And that's particularly the case if

53:40

one of his other predictions were to come true.

53:42

I Japanese have to have to avoid

53:45

yel curve, get rid of yel curve

53:47

control, and you suddenly find a pile of

53:49

bond market money flowing back into Japan and add

53:51

mother bum markets, the US is going to be in a whole part

53:54

of trouble. They're going to really need to

53:56

get people into treasuries and so take

53:58

it making income from government bonds tech. It seems

54:00

like a pretty straightforward way to get even if it does

54:02

destroy capitalism.

54:04

Yeah, my one that should with this

54:06

one is I'm

54:09

not sure how

54:12

that would go down really in the US.

54:14

Why I think the well, because

54:17

I think the US is still you

54:19

know, and then there's still quite an entrepreneurial

54:22

place. It's still got a

54:24

sense of the idea the private

54:26

sector being crowded out by the public sector.

54:28

And I think that

54:31

it's possible that a

54:34

large enough group of people would see through that

54:37

two basically, you

54:39

know, be against the idea. But

54:41

I mean, you know, that's more sort

54:44

of like hope place in my.

54:45

Own to say, look at you with your faith in the

54:47

in the people.

54:49

Well maybe maybe not the people, but the but

54:51

the mentality. I could totally

54:54

see it happening almost anywhere else, but I

54:56

can see there being possibly sufficient

54:58

objections to over there. I don't

55:01

I don't know, though. I mean, it's certainly it's

55:03

certainly not implausible, and

55:05

it was scary. Actually He's right, it would I mean,

55:07

that would be you know, given the

55:10

where interest rates are anyway, and the fact

55:12

there is going to be a lot of competition for capital

55:15

all over the place. Yeah,

55:18

you do have to kind of think that that

55:20

would be pretty damaging. But that's

55:23

what I'm you kind of hope that they would

55:25

realize it would be damaging because

55:27

you can't. You can't if you if you're killing the

55:29

golden goose just so that you can feature

55:31

creditors for a bit longer. I'd have thought the US

55:33

would just be if you like arrogant enough to

55:36

think, well where the US, you

55:38

know, we're the only country. We're at the m M T is

55:41

feasibly you know, possible

55:43

for a period of time.

55:44

So Stein was very end of times,

55:47

wasn't he.

55:48

I mean, I like

55:50

stayin, but it's sort of

55:53

like the only pretty much

55:55

the only mainstream person

55:57

or you know, close to the mainstream person who's actually

55:59

an austria An economists and Austrian economists

56:02

are basically always end times. And I have

56:04

a lot of sympathy for the Austrian view,

56:07

but like, I mean, one of the things that totally does agree

56:09

with me and Morton was the health thing and the.

56:13

Anti into a bit of Audie body

56:15

on that one.

56:16

Yeah, And I thought

56:18

that just I was glad because I was reading

56:20

the transcript and I was thinking I was

56:23

getting kind of quite irritated. And then

56:25

you came back and basically mentioned all the points that I

56:27

had mentioned, which was this, this

56:29

is the whole

56:33

idea that it's about kind of willpower

56:35

and that anyone's I mean, these these

56:37

these pills are not side effect for you, Ei, there

56:40

is a high huddle rate to wanting

56:42

to take them in the first place, and nobody

56:45

actually likes being

56:48

fat at the end of the day, John

56:52

things, well, no, it was just it's just another

56:55

it's it's just a very visible form

56:57

of kind of weaknesses like if I, you

57:00

know, if I if I put on like a

57:03

pound every time I drank a glass of wine,

57:05

then I wouldn't be able to set in this chair, you know,

57:07

and if you know, the real

57:09

problem all these other addictions like gambling

57:11

and smoking is that they don't show on your body

57:14

at least, you know, certainly not until it's

57:17

kind of very late in the day. And also

57:20

most of them have got a certain glamor about them,

57:22

and unfortunately having an issue

57:24

with food doesn't. So

57:27

I mean, yeah, so I don't think a I

57:29

don't think the people are going to give up

57:31

exercising because there is a

57:33

fat pill out there, because

57:36

the consequences are taking it are already pretty

57:38

significant.

57:39

So no, that was why I disagreed with I

57:41

thought I thought you'd take more exercise because,

57:44

as you white as you is way, you're much more able

57:46

to take exercise, and people like exercise.

57:49

But I suppose my issue with it wasn't

57:51

quite the same as yours. It's just that, you know, we always

57:53

tell people, or I certainly do when I when I'm righting my

57:55

columns and when I'm arguing on people, I

57:57

always said to them, you know, I think you

58:00

may want something to be like that, but

58:03

that's not the way it actually is. And we

58:05

have to work with the way things are rather

58:07

than the way that we want things

58:09

to be. So Stein wants people to

58:12

get a gret, he wants them to diet,

58:14

he wants them to exercise, he wants them to do the stuff

58:16

he wants them to do. But we know already

58:19

that they're not going to do that. We know this

58:22

doesn't work. We've got decades of experience

58:24

in learning, but nagging

58:26

people to go on a diet and nagging

58:28

them to exercise doesn't work because it's incredibly

58:31

hard. I mean, where does he think the diet the

58:33

diet publishing industry came from. If

58:36

diets worked, there'd only be one diet

58:38

book.

58:39

Yeah, and there's been no self help books. If

58:41

people want people who help themselves.

58:43

No self help books, absolutely, you

58:46

just need the one. So you

58:48

can't. You can't work

58:50

with how you want people to be. You have to work

58:53

with human nature. And that's I think. But what

58:55

these drugs do, and so they seem

58:57

to me to be a rather wonderful thing. But you know, there

58:59

you go. There's so many different opinions on

59:01

that particular one, but a lot of

59:03

a lot of what Stein wants

59:06

his people to people and economies

59:08

and businesses and government to behave in

59:10

a rational way. And he sees, I

59:12

think an end game where people will behave

59:15

in a rational way. And I'm not as confident

59:17

as him in that end game.

59:20

Well that that is the classic in Austrean

59:22

perspective, that you

59:25

should be.

59:26

Sensible everyone Well, suddenly there will

59:28

be a crisis. You should be there

59:30

will be a crisis, a horrible crisis, an

59:32

endgame that will make everybody see sense and

59:35

then things will be better. But

59:37

we're bad at seeing well, and

59:40

there's another you just have to model through.

59:42

There is no end game. I

59:44

think, I think all end game thinking from

59:47

you know, the stuff I do of somethy with like the

59:49

Austrian thing, to the stuff I don't know, sympathy

59:51

with like you know, but you know we're

59:55

all going to die play eminently

59:57

because the climate change is oppose to you

59:59

don't be in hundreds of years

1:00:01

or something like that.

1:00:02

I try so hard not to get onto climate

1:00:04

change so hard.

1:00:06

No, sorry, sorry, that was that

1:00:08

was Yeah, it was probably a bad example. But what

1:00:10

I mean is like apocalypse thinking, isn't

1:00:12

that help regardless of the truths

1:00:15

that are within both of those views?

1:00:17

When in the Austrian views, right, there are lots of things

1:00:20

wrong with the way that we've got our economy running,

1:00:22

and you know, it feels

1:00:25

like we will get to some point

1:00:27

where things have to change again. But they won't end,

1:00:29

They will just change.

1:00:31

You know.

1:00:31

It's like the world didn't end when Britain no

1:00:33

longer was the reserve currency. It just became

1:00:36

something else. And probably

1:00:38

over time the US doll it won't be the reserve

1:00:40

currency anymore. It will be something else. But all it will be is

1:00:43

a change rather than I

1:00:45

cannot you know, awake up where

1:00:47

we all suddenly start acting in a sensible

1:00:49

way.

1:00:51

So John and I we have a prediction, don't

1:00:53

we, John?

1:00:53

For the year.

1:00:54

There's a lot of forecasts out there them and everyone's

1:00:57

making their predictions. Some are dramatic, some or

1:00:59

not. But John and I would like to predict another

1:01:02

year of muddle through. Is that fair, John?

1:01:05

Yeah?

1:01:05

Actually, yeah, that's you. Yeah, definitely John.

1:01:08

One last thing I wanted to mention about Steen

1:01:10

I totally forgot, and apologies everyone

1:01:12

I can letally forgot to ask him about

1:01:15

bitcoin or gold. So I did talk to him

1:01:17

briefly afterwards about whether he

1:01:19

would have chosen bitcoin or gold had

1:01:21

I asked him the question at the right time, And his

1:01:23

answer was pretty simple. He said if he was young, if

1:01:25

he was below thirty, he might have

1:01:28

more of a think about bitcoin. But we didn't

1:01:30

really get into that, which is a shame because I'd like to know why.

1:01:32

However, his actual call would

1:01:35

be gold in a world, he says, with more

1:01:37

debt and less tangible asset

1:01:39

to back it. I think gold will

1:01:42

fly when one cycle ends

1:01:44

I hiking style and another one starts golden

1:01:46

commodities, So long gold for the next ten years.

1:01:49

That makes sense, that's to us. I'm

1:01:51

just wondering if the reason't he thought that his younger

1:01:53

self woul buy bitcoin is because he thinks his younger

1:01:55

self would be stupid.

1:01:57

I'm going to get a special hate mail email address

1:01:59

for you, John, I

1:02:03

look forward to it. Thanks

1:02:06

for listening to this week's Maren Talks Money. We'll be back

1:02:09

next week. In the meantime. If you like our show,

1:02:11

rate review, and subscribe wherever you listen to

1:02:13

your podcasts, and please do talk about our podcast

1:02:15

with your friends as well. The more listeners

1:02:17

the better. This episode was hosted

1:02:20

by me Maren Somerset Web. It was produced by

1:02:22

Summersadi, additional editing by Blake Maple's.

1:02:24

A special thanks to Stein Jacobsen and of course

1:02:26

to John Stappack