0:04

Welcome to Marin Talks Money, the podcast in

0:06

which are people who know the markets explain the

0:09

markets. This week we're looking ahead to the rest

0:11

of twenty twenty four, and yes we do

0:13

know that just because the year has changed doesn't mean that

0:15

things have automatically changed. But we still just

0:17

want to take this moment to talk about Wat's

0:19

in store for the UK economy, Watson Store for global

0:21

markets.

0:22

To do that with me as ever senior reporter and Money

0:24

You's.

0:24

Sort author, the great John Steppeck also

0:26

in our London studio today we are very lucky

0:29

to have Simon French, chief economist and head

0:31

of Research at UK investment bank Panmea

0:33

Gordon and Laura Folt, portfolio manager

0:35

at Janie Henderson Investors. Thank

0:37

you both so much for joining us, and thank you John for

0:40

being with me for the entire podcast

0:42

today.

0:43

Ye yay, Simon.

0:46

I want to talk to you because a

0:49

you write excellent notes which I love to read, Thank

0:51

you very much. And you also are

0:54

inventing your own vocabulary to go in

0:56

those notes. So the most recent one started

0:58

whispering quietly at risk of angering

1:01

the declinists, but UK economic

1:03

data has had a good couple of weeks. So let's talk

1:05

about those declinists. We know, I think what

1:07

they are. Where are they wrong?

1:09

It's something that I've seen a lot emerge

1:11

in UK andacro economic commentary

1:15

probably over the last six seven years. It is never

1:18

to be linked to the Brexit referendum. A

1:20

lot of individuals who had their political

1:23

nose put out a joint their economic

1:26

nose put out a joint

1:29

struggle. I think to give an objective

1:31

assessment on

1:34

UK economic data and benchmarket appropriately,

1:37

so a declinist will

1:39

point out all the challenges facing

1:42

a particular economy such

1:45

as the UK, without benchmarking

1:47

the same Let's say industrial

1:49

disputes. Yes, we have industrial

1:51

disputes and quite disruptive

1:54

industrial disputes in the UK. But look at German

1:56

macro look at the impact on the German economy

1:59

from industrial action. When one is looking

2:01

at the impact of energy costs on

2:03

real incomes, again a very

2:05

UK centric downbeat view on the impact

2:07

done to real purchasing power. Similar

2:10

impacts around the world. And so if

2:13

I try and do anything in my analysis and

2:15

then thank you for your kind words to the outset, is

2:17

to try and provide an objective assessment

2:20

rather than something that I think is colored to

2:22

the outset.

2:23

Yeah, do you know what I think we'd really like that I'm not

2:25

going to ask you for is we'd like a list of those declinists.

2:27

Certainly John so

2:31

so so that declinist. I'd

2:34

enjoy that. I'd enjoy that a lot.

2:36

We can mind it with the secret lest that we keep.

2:39

Right, Simon. So tell

2:42

me then, what's going to go right

2:44

for the UK this year? Because I want this to be

2:46

a reasonably upbeat podcast.

2:48

I accept it cannot be fully upbeat, but

2:50

I want to be pretty upbeaten. I think,

2:53

and I think you agree that there's quite a

2:55

lot that could go right this

2:57

year.

2:57

Tell us about those things.

2:59

There's something which I've described

3:02

as something of a relay handoff. You remember that,

3:04

you know, the last day of an Olympics, where

3:07

inevitably the GB relay

3:10

team drop the baton, don't they in the four

3:13

by one hundred? They even sometimes I anagine in the four

3:15

by four hundred. But I see it as an economic

3:17

baton passing from the last eighteen

3:19

months where households in the UK, which

3:22

drive economic activity consumer spending,

3:24

have had to use their balance sheets, their excess

3:26

savings, take on a bit of extra leverage to

3:28

deal with this cost of living squeeze,

3:31

the handoff the baton pass and what

3:34

I hope, not being a declinist,

3:36

what I hope will happen, is

3:39

that real incomes will

3:41

take up the slack. So it's in corporate

3:44

speak, it's handing over from

3:46

the balance sheet which households have had to rely

3:48

on to their p and L, their profit

3:51

and loss and count because the headline

3:53

rate of inflation will dip below

3:56

nominal income growth you get real income

3:58

growth. It's very difficult in mar economic

4:00

model, short of a massive spike

4:03

in the precautionary savings of the UK households,

4:05

to see an economic recession when you've got the

4:08

kind of real income growth we're anticipating

4:10

in twenty twenty four exactly.

4:12

So you very rarely see a recession in

4:14

periods of real wage growth, which we're back in now.

4:17

Something you talk about falling inflation, We've already got

4:19

inflation sub four. We've got nominal wage growth,

4:21

you know whatever, it is, six to seven for the last estimates,

4:24

so consumers are already back

4:26

in decent real wage growth. We've had

4:28

some tax cuts already we might go on to talk

4:30

about the budget, we might have some more on

4:32

most estimates, the household cash flow

4:35

after everything they need to spend on

4:37

energy, fuel, et cetera, et cetera, is

4:40

up seven maybe eight percent this

4:42

year. You know that's actually looking like a good

4:44

year for the household, and

4:46

we know that you can can just bring it on too equities.

4:49

For is that we know that UK equities aren't just a proxy

4:51

for the domestic economy, but there are a

4:53

lot of small and medium sized companies listed

4:55

here in the UK that have been out of favor

4:58

for a very long time. So

5:00

if we can have a year that actually the household's

5:02

doing a bit better, then surely it's a time to

5:05

potentially take a look at some of those more domestically

5:07

focused equities in the UK.

5:10

If that is the case, if we are expecting

5:12

to see sustained real wage growth, if

5:14

we are expecting to see households and significantly

5:17

better shape, if for optimistic all round

5:19

about the UK economy on that basis, can

5:21

we also expect interest

5:24

rate cuts?

5:24

Well, the market certainly is telling you that.

5:27

I'd be cautious of over

5:30

interpreting what the market is currently expecting

5:32

in terms of interest rates and

5:35

reductions of four or five or

5:39

four or five rate cuts for one hundred and twenty five

5:41

to one hundred and fifty basis points over the course the next

5:43

twelve months. That feels a bit rich for me. While

5:47

encouragingly and hopvily saw it in the last

5:49

note on a three month annualized basis,

5:52

core inflation now in the UK

5:54

is just one point four percent, and that

5:57

provides the data perhaps for the banking

6:00

and to think about moving interest

6:02

rates back closer to what it thinks as a neutral

6:04

rate. I think we do have to get

6:06

through what is going to be quite a crucial

6:09

April for core inflation. And

6:11

why do I focus on April? It seems an odd month

6:14

of the year to focus on. But last year,

6:16

if you decompose UK macro, you

6:19

saw that there was a big uprating event

6:23

of benefits, pensions, the National

6:25

living wage that generated some

6:27

quite aggressive core inflationary prints

6:29

in April, May and June of last year.

6:32

Now, while not quite in the same nominal

6:34

ballpark, they're still well above the rate

6:36

of inflation with the rate of increases to the pension,

6:39

to universal credit and to the National living

6:41

wage, and therefore I think the Bank of England

6:43

certy. If I was on the Munety Policy Committee, I'd

6:45

be saying, look, I want to see some

6:48

assurance that you're not going to have some second round

6:50

effects of all of that before you go

6:52

with the first rate cut. So my model

6:55

so you get the first rate cut in August

6:57

when you start to get some of that data, and you maybe

6:59

get one two more by the end of the year. But for

7:01

me, the market's a bit too rich on anticipating

7:04

the scale of rate cuts. It's pricing into the moment.

7:07

I don't disagree with Simon, but what I would say

7:09

is I almost think to an extent

7:11

it doesn't matter in the market

7:14

is pricing in what it's pricing in, and it's

7:16

already filtering through to mortgage rates. So

7:18

you're seeing five year mortgage rates. You

7:20

know, I saw there was one I think starting with the three this morning

7:22

from HSBC on a five That is

7:24

what really matters to your average

7:27

household. You know, the average household doesn't necessarily

7:30

follow exactly what the Bank of England is going to

7:32

do. You know, in every month's NBC meeting, what

7:34

matters to them is what they're going to pay on their mortgage

7:36

and you're already seeing that effectually having

7:38

a stimulating effect on household finances

7:41

today. So as long as the market's not completely

7:43

wrong about the direction of travel, I think

7:45

that's that's what ultimately matters.

7:47

What about savings rates though, And one of the things that

7:50

saved the economy last year, of course was the like

7:52

that well, interest rates

7:54

on debt weren't episode did interest rates

7:56

on deposit accounts, and we know that had

7:59

a great effect on household confidence.

8:02

Yes, and then credit to Bloomberg

8:05

and because of a Bloomberg

8:07

podcast, But I think Bloomberg Analysis

8:09

was the first to pick up on that about

8:12

six to nine months ago. The Resolution

8:14

Foundation made a bit of a splash of it last

8:16

week. I think we were somewhere in between

8:19

in terms of picking out the trends from

8:21

the pace with which UK

8:23

retail banks passed

8:26

on base rate

8:28

increases to savers, partly

8:30

not not because they're charitable organizations,

8:33

but partly because most are

8:35

on floating rate products and to

8:37

remain competitive, they matched

8:39

to some extent the increase, whereas

8:42

the debt structure, particularly household

8:44

mortgages, you're on much more of a fixed

8:47

term and therefore lagged

8:49

through the refinancing cycle meant that at a

8:51

household cash flow level, interest

8:55

rate increases were initially and are still

8:57

stimulative. Now because of the composition

8:59

of who gets the interest rates, who gets these

9:02

additional interest payments, and who actually pays

9:04

them, we don't think it is macro

9:06

stimulative. And also one also needs to

9:08

look at the corporate sector, which gets somewhat drowned

9:11

out by all of this. A lot of the debt held

9:13

by the UK corporate sector is

9:16

linked to Sonya, so the overnight bank

9:18

rate and which man

9:20

marked the increase in the

9:23

policy rate. So I think

9:25

some people have over interpreted this analysis and

9:27

meaning interest rates were stimulative

9:29

overall for the economy. I don't think that is right at all.

9:32

But certainly the scale

9:34

of demand destruction from

9:37

interest rate increases have been considerably

9:39

low in this cycle than it has been

9:41

in previous cycles.

9:43

But I was just going to see the Lada

9:45

how this is being made a pardon

9:47

and the companies that you're talking

9:50

to, because obviously small

9:52

companies in a regular basis, what

9:54

is there feeling does it reflect that can relative

9:58

optimism that we've.

9:59

Got is in the outlook

10:01

for the year ahead. I think what's

10:03

quite interesting is most companies are still

10:06

pretty cautious with some ecceteraents. We

10:08

saw next report last week, actually that was that was a

10:10

pretty good, pretty good numbers. We might

10:12

see know famous last weeks, we might see good numbers from

10:14

them ans and they haven't come out at the time recording.

10:17

But most companies when

10:19

you speak to them, are relatively

10:21

cautious because they've had a difficult couple of years. Right, They've

10:24

had COVID was not that long ago. They've

10:26

had all sorts of problems with supply chains, with cost

10:28

pressures, with labor shortages. But

10:30

what you'll tend to find,

10:32

and again sort of famous last words, is that

10:35

that cautiousness I think is now crept

10:37

into analyst fore costs, which is what

10:39

really matters when you look ahead.

10:42

If earnings numbers are in the right place for

10:44

twenty twenty four, and you're starting at evaluation

10:47

on the UK, which is lower than historical

10:50

average, is lower than other major developed markets,

10:53

and you've got your earnings forecasts in the right

10:55

place, which when I look

10:57

at individual companies, I think, yeah, okay, I think

10:59

that actually looked like a reasonable forecast. Now not

11:01

too optimistic doesn't assume a big pickup in the

11:03

economy because you know, who knows ultimately,

11:05

who knows what happens. That to me

11:08

feels like a good place to

11:10

start. UK company management

11:12

teams. Again, obviously with some exception, do you

11:14

tend to be a pretty conservative bunch, and

11:16

so do UK investors, And I think that's

11:18

actually, you know, that's that's a good

11:21

backdrop to start with.

11:23

So there's a lot of scope for positive subpises.

11:26

Possibly, I think there's there's some scope.

11:28

I mean, well, what you've got to remember is that there

11:30

are pockets of We always tend to talk

11:32

in this type of thing about the UK economy,

11:35

but actually there are so many individual

11:37

sub sectors with a huge numbers of different

11:40

their markets, and actually pockets of the UK have

11:42

effectually been in recession for the last

11:44

twelve eighteen months. If you look at things like house building

11:47

volumes have been down, you know, comfortable

11:50

volumes are down comfortably double digit. You

11:52

know, the building materials companies are talking about volumes

11:54

down thirty percent. You've

11:56

got advertising companies, you know, the likes of ITV,

11:58

the likes for some of the print media come again, proper,

12:01

proper recessionary conditions already

12:04

and yet you know, the likes and exce likes for

12:06

feminists are having good time. You know, there's a value

12:08

to talking about averages for the economy. There's also

12:10

a value about drilling down and seeing

12:12

that some end markets have already had a very tough time

12:15

and could start to come

12:17

out of the other side of that because of stimulating

12:19

effects of mortgage rate etc.

12:21

Etca.

12:22

So it's always worth well, that's my

12:24

job effetually to look at individual companies, and there are

12:26

companies where you can just start to see the greed and shoots

12:28

I think, I.

12:29

Mean, Laura makes it an excellent point, which is this

12:31

has been in a very uneven recovery

12:33

in consumer spending, and I

12:35

think we're still living with the impact

12:38

of the pandemic in terms

12:40

of consumer demand. If one looks at the data

12:42

release this morning at the time of recording

12:44

this podcast from Barkercard on

12:46

spending in December, still huge

12:49

demand for travel and leisure, which

12:51

feels again something

12:53

of a pent up frustration from periods

12:55

of time from households who could not consume that,

12:58

and that is bulletproof, really

13:00

bulletproof spending.

13:03

And you contrast that, of course to the real

13:05

estate sector, building materials sector, very

13:07

very different picture. If I can just throw in

13:09

the economic data on

13:12

business confidence and related

13:14

back to Marrin's opening question about declinism,

13:17

you've got Pan Europan

13:19

Euro's own business confidence surveys

13:22

the only country

13:24

major European country whereas

13:26

business confidence is above its long term averages in the UK

13:30

running for later

13:32

in the week.

13:34

The other thing I just actually wanted to pick up quickly

13:36

there was I've noticed the recruitment sector

13:39

there's a there's a clear evidence of

13:41

us in the air. Is that

13:44

reflecting issues in

13:46

the jobs market or do you feel that

13:48

is more of a it's almost

13:50

like a COVID pick through the pathon

13:52

things. There

13:55

was a boom and the in relative

13:57

term just coming down.

13:58

I think it's a latively hard

14:00

one to answer. So the context of this is that at the time

14:03

we're recording, Hayes, one of the big recruiters, had a profit

14:05

warning this morning shares are down to ten opsent.

14:08

What it's hard to know is, Okay,

14:10

this is literally one month of slowdown

14:13

in December that they're reporting on. So far everyone

14:15

was expecting to slow down.

14:16

The shares.

14:16

Generally recruiters have not performed brilliantly, and

14:18

here we are and it's happened and we've had a profit wanting

14:21

The question is is this one

14:23

month just before Christmas where people go,

14:25

actually, I don't want to move jobs right now. Leave we tok the new

14:27

year and I'll make a decision then, or is it

14:29

the start of a much more, a much

14:32

broader slowdown. And that's almost

14:34

what people have been waiting

14:37

for in this type of sector. I don't actually

14:39

only any recruiters, so it's not what I follow particular

14:41

closely. But in this type of sector,

14:44

the shares have performed poorly, are waiting

14:46

a downgrade. We now have the downgrade.

14:49

So the question is are we done or

14:52

is there more to go?

14:54

John? I credit you for not using the two

14:57

of my most hated words together, which

14:59

is soft landing. It's

15:02

regularly banded around and no one actually defines

15:04

it. I despise it almost as

15:06

much as hard landing. But what

15:09

you are looking at is a

15:11

situation where in the UK economy we have about

15:13

nine hundred and fifty thousand vacancies versus

15:15

a long term average of about seven hundred thousand

15:18

the last twenty years. So suggestions

15:20

if you just took that metric alone

15:23

of excess demand versus its

15:25

long term average and the degree to which

15:27

you can gradually

15:29

as particularly a

15:32

lot and I've been interesting to get Laura's view is

15:34

a lot of companies through the pandemic over

15:37

resourced on the labor side because they didn't

15:40

know who was going to get those dreaded to red lines

15:42

on their COVID tests and therefore can come into

15:44

work, and therefore they overresourced. And we're still getting

15:46

something what I've called the right sizing of

15:49

labor share phraseology

15:52

isn't it, But what you have there

15:54

is, as that right sizes, can it elegantly

15:58

go back to its long time average without undershooting?

16:01

And that is the delicate balance. And you alluded

16:04

to interest rates, and the criticism

16:06

that will come the way of central banks is

16:08

if they have underestimated the

16:10

lagged impact of some of these rate increases,

16:13

and it's going to mean that they're

16:15

currently making interest rate financial

16:18

conditions decisions that will

16:20

impact in two years time the

16:23

labor market in terms of labor demand will look very

16:25

very different to those aforementioned manundar of fifty thousand

16:27

vacancies we've got today.

16:29

I mean just from the perspective of companies and what I often

16:31

hear them say they worked very

16:33

hard to recruit people during the pandemic

16:35

and not know the worst skills shortages like I

16:37

mentioned before, and took in

16:39

some cases many years to fill. And now

16:42

even if they are seeing some downturn in demand,

16:44

whether it's modest, whether it's to do, they're very

16:46

keen to keep those people that they took

16:48

a long time to find, that they've trained up over a couple of

16:51

years. And so what you often hear is

16:54

we're going to keep what is probably over capacity

16:57

for a short period of time and not let those people

16:59

go. And you can as times you can't

17:01

see that in the jobs numbers. You know, unemployment is

17:03

remaining very low in the face of what's

17:05

been an incredibly steep pace of interest rate rise.

17:07

Is that we're fairly long in the two zone now. It

17:10

has been a good twelve to eighteen months.

17:12

Can we move on from talking about

17:14

the economy as a whole. I think let's all agree that we're

17:16

not going to be declinists and that we expect a

17:18

reasonably good year from the UK that

17:21

we feel although I'm pretty unconvinced

17:23

on this that inflation is controlled for now.

17:25

I'm not convinced on that at all.

17:27

That was the headline in one of the papers this morning saying that

17:29

team transitory could take about and I thought,

17:31

well, on that basis, pretty much all inflation

17:33

is transitory, right, If three years is transitory,

17:35

then what isn't transitory? So

17:37

I'm yet to be convinced

17:40

on inflation. But let's let's say

17:42

for now that looks fine, that there may be some interest

17:44

rate cuts towards the end of the year, that we're going to see a

17:46

little were real wage growth, but

17:48

the UK is actually going to look quite good

17:51

relative to some of the European economies, if

17:53

not relative to the US economy.

17:56

And that with that,

17:58

the UK stock market all levels

18:01

remains phenomenally cheap. What

18:03

might happen that might make the rest of the

18:05

world notice, or even domestic investors

18:08

notice and actually buy

18:10

some UK stocks? What might change

18:13

the flow here? Laura, have

18:15

you any thoughts on what might actually bring

18:17

people back into some of the funds that you manage?

18:19

Thanks for that, mar.

18:29

You honestly my most asked

18:31

and if I'm being honest, most frustrating

18:34

question, because

18:37

I think I honestly think no one can

18:39

ever tell you what a catalyst is before it happens. If

18:42

I could sit here and say, oh, here's what's going to happen, then

18:45

then wouldn't it have already happened in

18:47

December? And

18:49

I'm really clutching its raws here? There was

18:52

a slight increase in months on

18:54

month positioning if you look at the Meryls Farm Manager Service,

18:56

everyone of global farm manager positioning

18:59

in December, there was a slight increase

19:01

in allocation to the UK.

19:03

Now it remains it's a turnaround.

19:05

It's a turn around, it's the beginning. You

19:08

heard it here first.

19:09

But in terms of that, it's still

19:11

a big underweight, you know, to put it in an absolute

19:13

context, the UK is one of the biggest

19:15

underweight still. But there was a very slight

19:18

increase in allocation. Now my view is

19:20

always that it becomes a self fulfilling property,

19:22

i e. If the UK starts to outperform,

19:25

then other fund managers get go, oh, hang

19:27

on, what have you got over there? You know, it's such a rally

19:30

totally, it's such a relative game.

19:32

But it's gown the other way for so long.

19:34

I mean, it's hard to see. For example, the

19:37

UK's big wealth managers Caspent forever

19:40

cutting their exposure to UK equades. It's

19:42

hard to see them suddenly turning around and going or, what's

19:44

we were wrong about about having eighty percent

19:47

exposure to the US, We're going to come back in and by a little

19:49

more or UK. And it's unlikely

19:51

that you'd suddenly see them turning around and go, bother. We wish

19:53

we hadn't neglected UK small caps, you

19:55

said to me, it seems like that it's so dug

19:57

in now with

20:00

with these institutions, that the UK is the

20:02

wrong place to be.

20:05

I find some

20:07

of the logic for that slightly wrong though,

20:09

in that sometimes you hear wealth managers go look, well

20:11

THEMSCI World rating is for and

20:14

you think, well, okay, these are clients

20:16

with assets all in the UK, with liabilities

20:19

in the UK. Surely it's more

20:21

logical to match

20:24

some of that with UK equities. And

20:27

again I think it is a relative game in that you

20:29

know, if X wealth manager goes, well, I'm going to up

20:31

my UK actually once and suddenly

20:33

does better. I think the same dynamics

20:36

happen in the wealth management sector is in the fun management

20:38

sector. So I do think if

20:41

we start to see better performance,

20:44

then it can feed on itself

20:47

and come back to valuation.

20:50

There is this view of your total dinosaur,

20:52

etc. But

20:54

ultimately, if you go back historically,

20:57

over very very long time periods of value

20:59

you're starting valuation makes a very big

21:01

difference to your ending total return. And I

21:03

don't see why. I

21:06

don't see why this should be different.

21:08

Now that's over a very long time period. And you

21:11

know, people are well within their rights to say

21:13

you could have said this a couple of years ago,

21:15

just saying it again.

21:16

Now, well you did say it a couple of years ago,

21:18

and I did, and we are here now

21:21

will did.

21:22

But the valuation argument still holds.

21:25

Absolutely does look on

21:27

catalysts, and I'm

21:29

mindful of Laura staring me and the

21:32

point of saying, I don't believe anybody who

21:34

can attribute to catalysts

21:37

potential rally. I do think there are two policy

21:40

proposals, and maybe we're coming on to talk about the budget

21:42

that I think the government are now actively looking

21:44

at and not before time. And

21:46

I'm just going to stand on my soapbox slightly

21:48

in terms of just the

21:52

the way the UK Regulator

21:55

and the government has approached its

22:00

savings industry is to

22:03

think of it solely through the lens

22:06

of returns available to two

22:09

savers rather than the economic blowback

22:11

in terms of the cost of capital for the UK corporate

22:13

sector. And that

22:16

has meant that a

22:18

combination of that geography

22:21

agnostic approach which isn't matched

22:23

in any other major economy. The

22:25

Capital Markets Industry Task Force did a very good

22:28

letter ahead of the Autumn Statement on this, laying

22:30

out how rather than having a home bias,

22:32

we have an active or we do have an active

22:34

home bias but against our home market in our

22:36

pension industry. We're the only major economy

22:39

that does that. If we think

22:41

that, if we we've been very naive,

22:43

if we don't think that has a blowback on business investment,

22:46

heard or rates, etc. So I do think

22:48

that part of the solution, this is where I come to a policy

22:50

proposal, has to be to reorientate

22:53

our pension system to have more of a

22:55

home bias in ast allication. Now that may

22:57

be very uncomfortable with some people,

23:00

particularly those on the saver's lobby, who

23:02

want it to be geographically agnostic, but

23:06

the reality is that

23:08

the economic growth with which we are all

23:10

beneficiaries of stems

23:14

from having healthy capital markets. And

23:16

if we if we deny

23:19

our own market, that that capital that's

23:21

that's impediment. The way through, initially

23:23

I think, is through public sector define

23:26

benefit schemes. Why do I pick that cohort

23:28

of pensions Because if

23:31

you yield a positive externality

23:33

in economic parlance or economic growth, it

23:35

comes back to the exchequer in terms of

23:38

tax receipts. Who is the ultimate guarranteur

23:40

for the investment risk on defined benefit

23:42

public sector schemes. It's very

23:45

different with a private dB

23:47

scheme where it's the trustees or the underlying

23:50

firm or indeed DC schemes.

23:52

So that's why those big behemoth

23:55

public sector dB schemes need to be given a deminimus

23:58

allocation to UK equity and there

24:00

probably need to be quite material

24:02

double digits. We were back of forty

24:04

percent in nineteen ninety without four percent

24:07

a day. We probably need to go back probably

24:09

somewhere between the two. The other thing,

24:11

which is it was in the news again, is the idea

24:13

of tapping into the retail saver through

24:16

a brit iSER. It's something

24:18

I've put my name to as being

24:20

an advocate of, not because it's perfect

24:22

by any sense. But again, if

24:24

one looks at the US

24:27

economy and the Chips Act, the Inflation

24:29

Reduction Act, they are actively subsidizing

24:31

their domestic cost of capital. And yet

24:33

we are giving tax breaks to UK savers

24:35

to subsidize the cost of capital for Nvidia,

24:38

for Tesla, for Microsoft, for

24:40

Meta. It's madness and

24:42

I think the government are waking up to that. So look

24:44

two proposals that could change the direction

24:47

of flows. It's not with our political

24:49

cost. And it's my decent understanding

24:52

that the Treasury lost

24:54

their nerve back in November from doing

24:56

this very very close to the to

24:59

the autumn statement dead line. But

25:01

I think they may have more bravery in March, or at least

25:03

I hope they will.

25:04

Simon, do you think a britte is a

25:06

britt iSER should be additional

25:08

to the ISOs we already have or folded

25:11

into the current ISO structure, folded

25:14

in, folded in, So maybe you'd have an

25:16

ISO wrapper in which say fifty percent

25:19

was a britt iSER had to go into

25:22

UK assets and the rest was allowed to go abroad.

25:24

That kind of thing, Well.

25:25

I'd go one hundred percent and I negotiate down if

25:27

you want to look.

25:31

And by the way, I know there'll be people screaming

25:33

at their radio or their PC listening

25:35

to this going you're talking your own book. You work

25:38

at a UK investment bank. I

25:40

recognize the seat. The tiny in makes it

25:42

difficult for me to make this agenda. This is why

25:44

whenever I've put public commentary, either through

25:47

my column or in podcasts like

25:49

this, I've always come back to the economics

25:52

of all of this, which is we

25:54

simultaneously bemoan the lack

25:56

of investment that's taken place

25:58

in the UK economy gross fixed capital formation

26:01

within national accounts averaging about eighteen percent

26:03

of GDP compared to twenty four percent

26:06

in France, twenty three percent in Germany

26:08

G seven average about twenty one percent. That

26:11

under investment of capital running a CAPEX

26:14

light economy gets its

26:16

lack of stimulus from the fact that

26:18

are over many decades, and this is a

26:20

politically agnostic comment. We have

26:23

moved away from allocating capital

26:25

to our domestic market and we wonder

26:27

why Laura will tell me if a company

26:30

can inflate its short term earnings by

26:32

cutting its capital expenditure, and

26:35

that can look very attractive initially to shareholders,

26:38

but it does untold damage their long term earnings

26:40

capability, and I think that's what we're seeing now.

26:42

I mean, maybe if I could just add to that. You know, sometimes

26:44

when I'm talking to my friends, most of my friends don't work

26:46

in finance. I'm trying to explain de equitization,

26:49

i e. The shrinking of our equity market does

26:52

matter to people that work outside of finance.

26:54

Assignment was explained. You know, listed companies

26:57

invest UK, listed companies

26:59

invest more in the UK. We

27:01

have had a massive productivity problem in

27:03

the UK economy, partly due to lack

27:05

of capex. I think deecuitization,

27:08

I either shrinking of our market by takeovers,

27:11

by share buybacks, et cetera has

27:13

quite a bit to do with that. So if we can

27:15

reverse it, whether it's this brit I so

27:17

yes, it restricts people's choice a bit. You

27:20

know, they might have to invest in glackso not phiz them

27:22

if they want. If they want that tax wrapper, of course you

27:24

can go and invest in whatever you like is not within

27:27

Lisa wrapper. That

27:29

could ultimately and we'll have to wait, you know, five

27:31

ten years to see the results. But

27:33

if it means that deecoralization of the market

27:36

is stopped or reduced.

27:39

I do think it will have an impact on the UK

27:41

economy, but that we won't see immediately,

27:43

of course we won't, but over a long term

27:46

time period. So yes, you're restricting choice

27:49

in the short term, but it isn't

27:51

just for the purposes of us in the city talking

27:53

our own book. It's actually for the for

27:55

the health of the UK economy over the long

27:57

term.

27:58

Do you think another thing that could come up on the budget

28:00

that might be useful would be a reduction in stamp

28:03

duty and that our level of stamp duty

28:05

when it comes to extity trading is significantly

28:08

higher than most other countries. Do you think that's any

28:10

kind of a barrier for the UK market

28:12

and something that we could change.

28:15

Well, again, it cuts across

28:18

Laura, but the I

28:20

mean, I give a lot of credit to Charles Hall from

28:22

Peel Hunt, my equivalent head of research

28:24

over there, for pushing this as one

28:26

of the policy proposals, and I think

28:28

he's on something. And also anecdotally

28:30

speaking to US fund managers who

28:33

are looking when I first

28:35

started writing you talk about stale bulls of the

28:37

UK valuation story, I'm a probably six to seven

28:39

year staale bull on this one.

28:43

Well, yeah, mutual support

28:45

group, aren't we But USFO

28:47

manager you know who many

28:50

of his contemporaries six seven years

28:52

ago said, oh, it's what you're not

28:54

missing. It's compositional, compositional

28:57

or they made some excuse why the UK wasn't

28:59

underval You don't get that

29:01

anymore. So we have gone on a journey

29:03

where everybody almost

29:05

diagnostic of where they sit, where their seat

29:08

is as an investor recognizes

29:10

the valuation opportunity in the UK, but

29:13

also thinks there has to be a policy

29:15

catalyst. We've talked about a natural

29:17

buyer through public sector dB schemes. We've talked

29:19

about a natural buyer potentially through the brit isser.

29:22

You're absolutely right. Reducing

29:24

one of the impediments to owning UK cots,

29:27

which is the transactional costs associated with stamp

29:29

duty, is another one of those. The

29:31

reason I haven't thrown

29:34

my weight behind that one is

29:36

simply because my history of working in

29:39

the Treasury in the civil service means I

29:41

think this point

29:43

in the cycle, the Treasury

29:45

is going to be reluctant to give up on at

29:47

least near term tax revenue and if it has

29:50

a long term payoff.

29:51

Interesting. I didn't know you used to work in the civil service

29:53

on.

29:54

Dec everybody knows

29:57

that he write it in his notes all the time.

30:01

I mean, Charles Hall. If you ever look at the Peel

30:03

Hunts and for that, there's a long list

30:05

of suggestions in there around the

30:07

brit isis damp duty, inheritance

30:09

tax et cetera, et cetera. And I think I

30:12

think a combination even one of the above,

30:14

you know, would help. I don't think any

30:16

of them are going to be a silver bullet, but I think it

30:20

would really encourage me to know that the Treasury

30:22

are looking at these initiatives and just as

30:25

I said one, even just one would

30:27

would help the market.

30:28

At this point, you're kin of saying that the UK market,

30:32

and I suppose people have a your this in the past,

30:35

it's basically just too open and doesn't protect

30:37

itself sufficiently.

30:39

It's almost like we in the UK believe

30:42

in perfect capital markets

30:45

when which is

30:48

noble in a way, when when

30:51

none of the other major geographies

30:54

do you know in a perfect world

30:56

what we do here? As you say, very open capital

30:58

markets open to things M and a as well.

31:01

Historically, and we've seen

31:03

the effects of that, but it's

31:06

not replicated elsewhere, so

31:08

I think that's the problem.

31:10

And there are parallels here, aren't there. With the

31:13

Brexit what

31:16

do we call it? A period of

31:19

UK macro where I

31:21

would love the

31:24

UK to be able to unilaterally

31:26

lower all its tariffs and trade barriers and every

31:29

other country follows suit. And

31:31

there are many on the libertarian

31:33

wing of the Conservative Party who

31:36

would like that to happen. And they will be

31:38

looking over their shoulder to see whether the Europeans,

31:40

or the Americans or the Chinese are going to follow suit,

31:42

and they will see themselves to be alone. So

31:45

there's much in modern it's not

31:47

just economics but actually modern politics

31:49

where you would very much like everybody

31:52

collectively to move

31:54

to a new, better equilibrium

31:57

when it comes to official

32:00

market hypothesis free flow of capital.

32:04

We live in the world we live in, not the world we want to

32:06

live in.

32:07

Yeah, we tell our guess that a lot.

32:12

This could bring me back to weight loss drugs, but apparently

32:14

I'm not allowed to talk about those today. Leave

32:17

those for now, and I'll tell you what the world

32:19

people want to live in, not the world they do live in.

32:21

House prices. I know John wants

32:23

to ask you about house prices, don't

32:26

you, John, I.

32:27

See yes, So no Simon,

32:30

I'm going to go with Simon Fostiologist because I know he's

32:32

actually got You had that thesis on this

32:34

and it was very similar to mein which is the

32:36

thirty percent real terms fall probably

32:39

over the course of about two ash years

32:42

from peak to trough. Boy,

32:44

are you thinking no? Because

32:47

if I'm being honest,

32:49

then okay, trace is down. It be fourteen

32:51

fifteen percent in real terms. So far I

32:55

struggle givin the fact that

32:57

I'm mordalately optimistic on the

32:59

UK coining me in twenty twenty four to

33:02

think that they're going to go down much further

33:05

even in real terms. And if I'm mons,

33:07

I'm surprised that they only weren't doing weight

33:10

three or four percent in norminal terms this

33:12

year also last year. So I'm clean of curious

33:14

to see what your remainder's on that.

33:17

Or lies, damn

33:20

lies and haalth price statistics.

33:23

So, for example, while nationwide

33:26

Halifax may tell you that there are very

33:28

small single digit declines in UK

33:30

house price in the last twelve months, if you go to the Land

33:32

Registry and look at the total

33:35

number of transactions and the

33:37

average transaction price in

33:39

twenty twenty three verus T twenty two, it's down

33:41

about seven percent, and

33:44

it's down about eleven

33:46

percent from its peak, and that in nominal terms,

33:48

so you start to get towards the numbers we were

33:50

talking about if you had an inflation over that

33:53

that period. Now that is just

33:55

a It's not a better methodology than

33:57

Halifax, because you've got some compositional effects

33:59

in there, but it's just too if you like,

34:03

perhaps defend some of those bearish

34:06

forecasts that I put out there on the UK housing

34:08

market going forward,

34:10

though we have to be mindful of something,

34:12

or I hope you're mindful of something I said about ten fifty minutes

34:14

ago, which is that delayed lag of interest

34:17

rate increases. So while the economy,

34:20

I think because of the P and L, the

34:22

real earnings picture will

34:25

improve, we're going to have cohorts,

34:28

particularly exposed to not

34:30

just first time buyers, but also

34:33

secondary activity in the market who

34:35

are going to come to a refinancing moment,

34:38

which, even if and Laura is spot

34:40

on, the products now available at less

34:42

than four percent, although svrs are still

34:45

up six and a half seven percent, there's

34:47

still some painful refinancing to

34:50

come for millions of households, which

34:52

makes me nervous

34:54

that this market is out of the wood.

34:57

Ah, it's center interesting, I think,

35:00

coming at it from a house builder perspective,

35:02

are some of the listed companies. What

35:04

they did this time last year

35:07

was they saw the dynamics happening

35:09

in terms of interest rates, and they sharply

35:11

pulled back on volumes. And that's

35:13

what's impacted the likes of the building materials

35:16

companies that I was talking about earlier. So they

35:19

effectually pulled the lead. They didn't they never want to

35:21

pull the price lever right, because you drop

35:23

a pound of price, it drops

35:25

very quickly through to your ownings. So they

35:27

pulled back on land purchases, they pulled

35:30

back on their building activity, and

35:33

now rates have come down, as in mortgage

35:35

rates have come down. The problem that the

35:37

house builders have potentially got for this year

35:39

is actually that they didn't buy land last

35:42

year. So even if the housing

35:44

market gets better, does pick up, I

35:46

don't know if it will, but just say it does, it's

35:49

effectively it's effectually

35:51

too late for this year because

35:53

they haven't got the land, they haven't got the houses half built

35:56

or not in the volumes that they could potentially need, so that the

35:58

housing market always comes with with a lag.

36:00

So this year, if they want to respond,

36:03

it's the opposite. They'll have to use

36:05

pricing as in prices. Well,

36:07

it's not volumes, it's pricing for this year.

36:10

So how's

36:12

calling house prices? I

36:14

know it's for national part, But

36:17

this year, if you're a house builder and you can't

36:19

ramp up your volumes quickly, what do you do? You put up

36:21

the price or you reduce the incentives?

36:25

Okay, house price is called in opposite directions.

36:27

I like that. Well, but

36:30

blaking it back to the conversation, we just had an equity

36:32

market. The US residential

36:35

property market is about forty seven

36:37

trillion dollars of value, and

36:39

so is the US stock market,

36:42

so one for one, and yet our residential

36:44

market is eight and a half

36:47

trillion and our stock market is two and a half

36:49

trillion, so we're kind of three and a

36:51

half to one. If you're looking

36:53

at a misallocation, systematic misallocation

36:56

of capital many many, many years,

36:59

just look at ratio alone.

37:01

When do you get your own here? Just write a B whose

37:03

place is honestly

37:06

me? And could the week or let's

37:09

not do this anymore.

37:10

Let's just have them do it every week.

37:11

Anyway, when the UK equity market turns

37:14

around, that ratio is going to change,

37:16

Simon, So you know we'll be will be fine.

37:18

If John House price falls

37:20

go through, and you too

37:22

are right on UK equities being cheap will

37:24

be one to one by the beginning of next year,

37:28

It's probably fine. It will be fine.

37:31

Now listen Onto Onto,

37:33

Everything's going to be wonderful. UK equity

37:35

is going to do brilliantly. Laura, what

37:38

do we buy? Tell us about some of your favorite

37:40

stocks.

37:41

Okay, start the top more domestic

37:43

companies, I think are where is

37:45

where the biggest valuation opportunity

37:48

is if you go you know, Simon's mentioned

37:50

Brexit. I know it feels odd to still

37:52

be talking about Brexit. We're in twenty twenty four. But

37:55

if you look at how domestic

37:57

so this is just UK shares, but how

37:59

in national earners within the UK of

38:01

don relative to domestic owners within the UK

38:04

the gap is huge. You know, we're talking thirty

38:06

to forty percent difference in total return since

38:08

that Brexit vote. If you go before that,

38:11

there isn't much of a difference.

38:13

I e.

38:13

It's not the case that domestic companies always underperform.

38:16

You know, you're picking exhibit it's irrelevant, it's not.

38:19

There is a big disjoint

38:22

that happens around the time of the Brexivote, and that domestic

38:25

pe if you like, has been

38:27

almost sustainably with a few exceptions

38:30

around elections, it's been almost sustainably

38:32

de rated since that oat.

38:35

Just be clear Laurd the listeners.

38:36

We're talking about evaluation difference,

38:39

not about a business performance difference.

38:42

Very good point. Yes, sorry, we're talking about valuation

38:44

difference.

38:45

I e.

38:46

Domestic UK has been

38:48

sustained has suffered a sustained

38:51

de rating since the Brexivote. It's

38:53

not that these shares have perennially

38:55

underperformed. It's that people

38:57

have had a preference for the more international

39:00

end of the market, the unilevers to gsks

39:02

of the world, rather than the more domestic

39:04

businesses. So my starting

39:07

point is that it is the more domestic businesses

39:09

that present the clearest value

39:12

opportunity. They tend to

39:14

be found at the smaller cap end of the market for

39:16

very common sense reasons that you

39:19

know, if you're a small company, where are you going to serve

39:21

first you're going to serve your domestic market first, and

39:23

then if you're successful, you're going to go overseas. So

39:25

domestic companies have more of their sales, more

39:27

of their earnings here in the UK, whereas the fifty

39:29

one hundred is its three quarters roughly

39:32

overseas. The reverse is true

39:34

for the FITSY small cap and once you get down

39:36

to aim. So that's that's my starting point.

39:38

And then beyond that, there

39:40

are industries, some of which we've spoken about

39:42

already, that have been in recession conditions

39:45

and where earnings have halved,

39:47

in some cases more than halved. You

39:49

know, the likes of building materials and the likes

39:51

of some advertising exposed companies. If

39:54

you can buy a business where earnings

39:57

of half more than halved, and yet you're

39:59

still buying that business on evaluation

40:02

that's below its long run average, I you're

40:05

buying low valuation on low earnings.

40:07

To me, that presents a

40:09

pretty compelling opportunity for

40:12

when those earnings turn around.

40:14

Now I can't sit here and say, you know, with some of these

40:16

building materials companies, it's going to turn around

40:18

this year. But what I can say is that I think

40:20

earnings will recover

40:22

over a sustained period of time. I

40:25

can't give any to be clear, this

40:27

is not a stock recommendation. But if

40:29

we're talking companies, you know what type of companies

40:31

am I talking about. I'm talking about companies

40:34

like say Ipstock, which is one of the big brick

40:36

manufacturers here in the UK. There is

40:38

no structural problem

40:41

with that industry. You know, we still

40:43

deed houses. We build them out of bricks. It's not super

40:45

complicated. It's a very consolidated

40:47

industry. There's only a couple of players. But

40:50

bricks have had a very tough time for all

40:52

the reasons we spoke about. Volumes are down

40:55

materially, so we've seen a company like that lose

40:57

roughly forty percent of its earning set for the last

40:59

cup years, and yet the valuation

41:02

is lower than its

41:04

long run average. I think

41:06

this is a particularly interesting example because this is a company

41:08

that was listed my number

41:10

of years ago now by private equity. It

41:12

was under invested at the time of IPO, It's

41:15

gone through a long period of catch up capex

41:17

et cetera, and it's lower than its IPO

41:19

price. You know, it's on a lower valuation than that, and

41:21

it.

41:21

Would just run private equity.

41:24

Well quite, but it would just

41:26

be the irritation of my life if it got

41:28

taken out, if it got bid

41:30

for. To be clear, there's no bid roomors whatsoever.

41:32

If it did big.

41:34

Rumors on every UK earlier,

41:37

it's easier disclaimer.

41:39

It would be such an irritation if

41:41

it got taken out by private equity

41:43

again at evaluation, you

41:46

know, lower than what it got listed for when we, as

41:48

the public markets have founded funded

41:50

a ton of capex. For it to be a much better invested

41:53

business, for it to be a better run business than when

41:55

it was listed just be so irritating

41:57

and yet so typical. So

41:59

it's type of company that

42:01

I'm looking at, you know that,

42:04

To be clear, we own a company like that already. But

42:06

I think that is the more interesting

42:09

end of the UK market. And it's not

42:11

me saying that the likes of you know, Glaxo Unilever

42:14

are overvalued. You know,

42:16

there is still a valuation discount at that large cap

42:18

end of the market as well, but it's

42:21

all about you know, relative valuation,

42:23

and to me it

42:25

is the smaller and more domestic businesses that present

42:28

the best value opportunity. But it's not

42:30

to say that you know, the likes of Burbery, Unilever, et

42:32

cetera. Aren't low lever. It's just about extremes

42:35

within the UK market.

42:36

Yeah, and this is that the big danger that you've

42:39

mentioned is that these companies

42:41

are so inexpensive and

42:44

we don't buy them, and eventually somebody

42:46

else does and then they're lost to us. As we're

42:49

losing a lot of companies at the smaller end of the market,

42:51

aren't we.

42:52

Yeah.

42:53

I have a new Year's resolution for myself, which is

42:55

must do better at rejecting

43:00

overly miserly takeover

43:03

deals because it's so tempting.

43:05

You know, the day of a of a takeover

43:07

deal from private equity, it feels great

43:09

for your relative performance and you think, yes, I've been vindicated

43:12

this this company it was too cheap and a fifty

43:14

percent PREMI or whatever, you know, thirty fifty percent

43:16

premium. You think, yes, you know, I was right hah. But

43:19

then that company is gone. You

43:21

know, we need to get better at saying

43:25

no, you know, and I have

43:27

we you know, we have occasionally voted for deals

43:29

where we feel really strongly. But I think as

43:31

an industry we

43:34

could do better actually at publicly

43:37

saying or not even publicly, just

43:39

privately voting voting deals down. And

43:42

then you know that is the

43:45

power is effectively in our hands to stop

43:47

something, and we should do better

43:49

at that.

43:50

This is error's wife. Well,

43:53

this is why flows us so important

43:56

and why since twenty sixteen,

44:00

I think it's seventy eight

44:02

out of ninety one quarters have seen outflows

44:04

from UK equity funds. The

44:09

I'm not certainly not commenting on Laura,

44:12

but the backbone of fund managers

44:14

to say no becomes easier

44:16

in a backdrop of inflows than it does and

44:19

sustained outflows. And so this

44:22

comes back and perhaps we can link it to the

44:24

US market because we think there's something

44:27

esoteric about UK equity

44:29

market pro cyclicality, negative

44:32

procyclicality of pricing. Look

44:34

at the procyclicality going on in the world's biggest

44:36

stock market. We talk about this magnificent

44:38

seven. You are seeing performance

44:41

bequeathing performance, liquidity bequeathing

44:43

liquidity. You are seeing

44:46

some of the legacy of the

44:48

way in which capital is allocated

44:51

in those regulatory decisions manifesting

44:53

itself in how prices are discovered.

44:55

It's not healthy from an economic allocative

44:57

efficiency standpoint, it's not healthy,

45:00

and I really hope, well, maybe my news resolution

45:03

is just to be able to make

45:05

that economic argument as to why

45:07

if we only look at it through

45:10

a capital agnostic saver's

45:12

lens, we do untold damage to the

45:14

economic efficiency. And I feel like the social

45:17

function of capital markets, which is a really

45:19

great story on many story

45:21

great stories for bankers and investors

45:23

to tell, but that is a good socially conscious

45:27

story to tell.

45:28

Is that just the clarify

45:31

that slightly is that basically

45:33

because I was thinking O that the we're

45:35

living in the world, we are part of the

45:37

big part of the problem to me seems to be that every

45:40

marginal pond or dollar or

45:42

even euro invested was any

45:45

the seven biggest stocks in America. That

45:48

basically what talking about

45:50

passive flaw is just constantly

45:52

pumping into the kind

45:54

of slate black hall of capital in

45:57

the years.

45:58

Again, it's passive this part

46:00

of the story. But again I don't want

46:02

to sound like I'm talking the

46:05

active industry book. There are other things

46:07

as well, which is the

46:10

momentum trading, you

46:12

performance bequeathing liquidity. The

46:14

consolidation of fund funds

46:17

means that some of the smaller MidCap end

46:19

of the spectrum. We see a day

46:21

to day we try and get US

46:23

investors into UK stocks and they say

46:25

to us, how much does it trade per day?

46:28

And we say, well, it trades two hundred thousand pounds

46:30

a day. I say, well, I love the company, I love the management

46:33

team, I love the valuation, but my risk officer

46:35

says that I can't do anything

46:37

with sub let's say two million

46:39

pounds a day trading and if you get

46:41

yourself in a pro six little doom

46:43

loop, which is a I

46:46

mean, I know this has been a very up by podcast and I'm pleased

46:48

it has, but let's acknowledge we are in a pro little

46:50

doom loop. You need a

46:54

catalyst to take you in the opposite

46:56

direction, because otherwise you are

46:58

blocking pools of capital out from making

47:00

really attractive investment opportunities in where

47:02

Laura are very, very respected for

47:04

manager in London recognizes

47:07

the value is and yet she's

47:09

not alone. But there are too many impediments

47:12

amongst the big institutions from taking those stakes

47:14

because of lack of liquidity.

47:16

Okay, I don't ever want to hear the phrase

47:18

pro cyclical doom loop on this podcast

47:20

again.

47:24

Write that down John, no more do.

47:27

Bind list?

47:28

Okay, on the subject

47:32

of flows creating performance. This

47:34

is a week when everyone's talking about bitcoin, talking

47:36

about possibility of the arrival of bitcoin ETFs,

47:39

etc. So we are going to move on to our

47:41

final question to both of you, which we

47:43

are obliged to ask every single week because

47:45

we are keeping a record of the answers,

47:48

and we'll come back to name and shame over the

47:50

next couple of years. On this one, if

47:52

you had to hold one asset of one I said,

47:54

only for ten years, and you weren't

47:57

allowed to trade at all, you just had to stick it in a

47:59

room and leave it there. Of course, difficult to stick something non

48:01

physical in a room, but you know what I mean. If

48:03

you had to do that, would you choose

48:06

bitcoin, gold or

48:08

for the very cautious, we also

48:10

offer a cash option.

48:14

I'm going to pick gold you

48:16

because I feel like I don't understand

48:18

bitcoin. As in, if someone

48:20

can tell me what it's used

48:24

for, I

48:26

would I'd be open to that, But

48:28

at the moment, I just feel like I don't understand

48:30

it, So I'm going to pick gold.

48:34

Distinct possibility that you do understand it.

48:36

That's the other thing to stink right,

48:41

Simon, did you actually say cash?

48:44

I did.

48:46

You are?

48:48

Okay?

48:48

I know I just banned him because of the doom loop

48:50

thing, but I'm unbanning him.

48:52

Come on, Sack and tell.

48:52

Us why

48:55

would I take cash against those other two options?

48:59

Because I think cash returns will I

49:02

mean, certainly exceed bitcoin on current

49:04

valuations. It's a

49:07

fraud hiding in plain sight, greater

49:10

full theory. All of these things characterize

49:14

cryptocurrencies. It's as old as the hills.

49:16

Private currencies eventually trackeds,

49:23

deviants, and fraudsters, and

49:26

bitcoin will be no different. It's just in a digital

49:28

form rather than a vegetable. And

49:32

gold. Look, I like gold, and to

49:34

some extent, I'm going

49:36

the other side of the table to Laura because

49:38

she said gold. She went. But

49:41

I can also make a decent argument, actually,

49:43

the cash returns over the next few years

49:46

will be better than a commodity

49:48

that It's not far off it's real

49:51

terms high. It's very close to its nominal height.

49:53

It's very close to its real terms high as well,

49:55

so it's a little bit towards the

49:57

top end of its historical range.

50:00

So yeah, I can make an argument for cash.

50:02

Okay, brilliant thank you, and Simon, would you mind

50:04

if I make the headline to this podcast bitcoin

50:07

fraud hiding in plain sight, says Simon

50:10

French.

50:11

Be delighted. That works for absolutely

50:14

delighted.

50:15

Excellent. Thank you very much. We appreciate

50:17

that that. We like a bit of clickbait.

50:22

Oh wait, one one quick thing. I think Pepper

50:24

waent for cash as well. Yeah,

50:28

yeah, she knocked back bitcoin

50:30

and Golden went for cash last remember,

50:32

because I was so struck by it. So you read

50:34

You're only the second personally.

50:39

Not to worry.

50:40

Case is a celside analyst, your second to the

50:42

party black.

50:46

Thanks for listening to this week's Maren Talks Money.

50:48

We'll be back next week in the meantime. If you like

50:50

our show, rate review and subscribe wherever you

50:52

listen to podcasts. This episode was hosted

50:54

by me Maren Sumsett Web was produced by

50:56

Sumersadi Dditional lessening by Blake Maple

50:59

as well. Thanks a lot of all, Simon French and

51:01

John Steppek. The short of sign up to John's

51:03

daily news.

51:04

Letter Money Distilled. The link is in the show

51:06

list