WEBVTT - Melt-Up or Mirage? Markets Ignore Everything but Earnings

0:00:02.759 --> 0:00:19.119
<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Maren

0:00:19.160 --> 0:00:21.240
<v Speaker 1>Talks Money Market Wrap. What we talk about the biggest

0:00:21.239 --> 0:00:23.960
<v Speaker 1>moves in markets this weekend? What is driving them? I

0:00:24.000 --> 0:00:26.560
<v Speaker 1>am Maren zum Zet, Web Editor at Large for Bloomberg

0:00:26.640 --> 0:00:27.520
<v Speaker 1>UK Wealth.

0:00:27.680 --> 0:00:30.400
<v Speaker 2>And I'm join Stoic, Senior Reports and author of them

0:00:30.440 --> 0:00:31.600
<v Speaker 2>Money Distilled newsletter.

0:00:33.360 --> 0:00:37.080
<v Speaker 1>Right, John, the bullmarket is back big time. We don't

0:00:37.080 --> 0:00:39.600
<v Speaker 1>even need to bother talking about what's happening in the

0:00:39.640 --> 0:00:41.440
<v Speaker 1>Middle East or what is not happening in the Middle

0:00:41.479 --> 0:00:42.919
<v Speaker 1>of the East. We have no idea. We're just going

0:00:42.960 --> 0:00:43.560
<v Speaker 1>to leave it there.

0:00:43.600 --> 0:00:46.199
<v Speaker 2>But it doesn't care. It doesn't care.

0:00:46.240 --> 0:00:49.000
<v Speaker 1>The market literally doesn't care. Market doesn't care about anything

0:00:49.400 --> 0:00:51.839
<v Speaker 1>except for what at the moment, it's earning numbers, right

0:00:51.960 --> 0:00:55.280
<v Speaker 1>shall We having an amazing earning season, and everyone you

0:00:55.320 --> 0:00:56.760
<v Speaker 1>talk to you he just says, well, this is just

0:00:56.960 --> 0:00:59.360
<v Speaker 1>the most massive of bull markets. And it has to

0:00:59.400 --> 0:01:02.680
<v Speaker 1>be because everybody has some kind of earning surprise. And

0:01:02.720 --> 0:01:05.200
<v Speaker 1>now we're moving into a proper melt up situation. And

0:01:05.240 --> 0:01:07.800
<v Speaker 1>this is all marvelous, ai tastic.

0:01:08.040 --> 0:01:09.640
<v Speaker 2>And no one can get enough compute.

0:01:09.800 --> 0:01:10.880
<v Speaker 1>I can't get enough computer.

0:01:11.520 --> 0:01:17.080
<v Speaker 2>Just no compute anywhere Christy does not compute. Yeah, no,

0:01:17.400 --> 0:01:21.000
<v Speaker 2>so anyway, we could just repeat words of each other.

0:01:21.840 --> 0:01:24.800
<v Speaker 1>But it's amazing you tell us about that. He's going.

0:01:25.080 --> 0:01:27.959
<v Speaker 2>It's just like the Nasdak is up eleven percent since

0:01:28.040 --> 0:01:31.160
<v Speaker 2>the Iran war kicked off. So I know we weren't

0:01:31.160 --> 0:01:32.720
<v Speaker 2>going to mention it, but it's just one of those

0:01:32.920 --> 0:01:38.000
<v Speaker 2>things where you get okay. So clearly the Baer case

0:01:38.200 --> 0:01:41.200
<v Speaker 2>is not being made here. And I thought it was

0:01:41.240 --> 0:01:44.280
<v Speaker 2>interesting that the magazine cover indicator has once again paid

0:01:44.319 --> 0:01:46.240
<v Speaker 2>off just so dramatically.

0:01:46.280 --> 0:01:49.440
<v Speaker 1>Well magazine would John, which magazine would that be?

0:01:50.040 --> 0:01:52.400
<v Speaker 2>It does sound tongue in cheeking poor old economists, but

0:01:52.440 --> 0:01:54.960
<v Speaker 2>it's not. I mean, the reason the economist walks well

0:01:55.000 --> 0:01:57.840
<v Speaker 2>for this is because the economist is the voice of

0:01:58.840 --> 0:02:02.360
<v Speaker 2>the closest thing you get to, the crossover between mainstream

0:02:02.440 --> 0:02:06.800
<v Speaker 2>and business news, so biggest audience for that kind of thing.

0:02:07.200 --> 0:02:09.560
<v Speaker 2>So when you see something on the cover that's related

0:02:09.560 --> 0:02:11.919
<v Speaker 2>to markets, then it just it must be in the price.

0:02:12.200 --> 0:02:14.679
<v Speaker 2>It can't not be in the price because by definition

0:02:14.760 --> 0:02:17.560
<v Speaker 2>everyone already knows it. And when it comes to the

0:02:17.600 --> 0:02:21.359
<v Speaker 2>oil market, the econmans has got particularly strong form because

0:02:21.400 --> 0:02:23.520
<v Speaker 2>one of the most famous covers they ever did was

0:02:23.560 --> 0:02:26.440
<v Speaker 2>back in the late nineties when they did a cover

0:02:26.560 --> 0:02:29.799
<v Speaker 2>that was kind of the headline was drowning in Oil,

0:02:30.560 --> 0:02:32.320
<v Speaker 2>and the idea was basically that the oil price was

0:02:32.400 --> 0:02:34.080
<v Speaker 2>never going to go up again, and basically that was

0:02:34.120 --> 0:02:37.160
<v Speaker 2>the bottom forever, the lowest price the oil ever got

0:02:37.200 --> 0:02:39.640
<v Speaker 2>to until that time. It went negative in you know,

0:02:39.720 --> 0:02:43.760
<v Speaker 2>twenty twenty, and so on last week they came out

0:02:43.800 --> 0:02:47.120
<v Speaker 2>with a cover saying basically, you people are crazy. The

0:02:47.240 --> 0:02:49.720
<v Speaker 2>oil price is far too low. And of course since

0:02:49.760 --> 0:02:51.919
<v Speaker 2>that cover came out, the oil price is down by

0:02:52.000 --> 0:02:57.040
<v Speaker 2>ten percent. So it's just brilliant for kind of just

0:02:57.280 --> 0:03:01.120
<v Speaker 2>building for kind of contrarian positioning, but particularly on oil

0:03:01.200 --> 0:03:01.880
<v Speaker 2>for some reason.

0:03:02.600 --> 0:03:04.840
<v Speaker 1>Well, they may yet be right, you know, inn trees

0:03:04.880 --> 0:03:07.760
<v Speaker 1>have been masking and aful lot of potential supply problems,

0:03:07.880 --> 0:03:10.240
<v Speaker 1>so you know, we may see another hike in the

0:03:10.240 --> 0:03:12.720
<v Speaker 1>old price coming and things may change in the Middle East.

0:03:12.960 --> 0:03:14.959
<v Speaker 1>I mean, who knows, who knows, but you're right the

0:03:15.480 --> 0:03:18.000
<v Speaker 1>magazine cover. When I was looking this morning again, I

0:03:18.040 --> 0:03:20.600
<v Speaker 1>wanted to look back and actually double check when it

0:03:20.760 --> 0:03:23.560
<v Speaker 1>was that BusinessWeek had that covered the number the one

0:03:23.600 --> 0:03:25.880
<v Speaker 1>and what we would remember it obviously, but death of

0:03:25.919 --> 0:03:29.560
<v Speaker 1>Equities it was. Remember that that was nineteen seventy nineteen

0:03:29.600 --> 0:03:33.880
<v Speaker 1>seventy nine, just before inflation got kicked and everything went

0:03:33.919 --> 0:03:37.320
<v Speaker 1>into massive, massive balls. So always worth looking at at

0:03:37.640 --> 0:03:38.880
<v Speaker 1>magazines anyway, did.

0:03:38.800 --> 0:03:40.800
<v Speaker 2>You not just one of our things one of my

0:03:40.960 --> 0:03:43.760
<v Speaker 2>favorite parts of trivia general what year Business Week launched

0:03:44.720 --> 0:03:45.840
<v Speaker 2>nineteen twenty nine?

0:03:46.080 --> 0:03:50.080
<v Speaker 1>Yeah, that would have been my guess. Yeah, wow, brilliant.

0:03:50.200 --> 0:03:52.720
<v Speaker 1>Although you know what, I have very little moral high

0:03:52.720 --> 0:03:55.800
<v Speaker 1>ground here because you remember when Money Week, the magazine

0:03:55.800 --> 0:03:57.000
<v Speaker 1>I was launched, ediitor.

0:03:56.760 --> 0:03:57.680
<v Speaker 2>Of launched.

0:03:59.800 --> 0:04:03.080
<v Speaker 1>Nineteen ninety nine was our trial issues and the first

0:04:03.120 --> 0:04:06.360
<v Speaker 1>couple came out in early two thousand. Although we were

0:04:06.600 --> 0:04:09.560
<v Speaker 1>very very bearish on the dot com komboom we are

0:04:09.600 --> 0:04:13.600
<v Speaker 1>where we're beurish people, but nonetheless that that's when it launched.

0:04:13.600 --> 0:04:15.240
<v Speaker 1>But that was because that was the time when people

0:04:15.240 --> 0:04:18.400
<v Speaker 1>were prepared to finance and financial magazine. Because everyone was

0:04:18.400 --> 0:04:21.480
<v Speaker 1>interested in markets and money and finance. Everyone wanted more

0:04:21.480 --> 0:04:23.720
<v Speaker 1>and more information, so that's when people were prepared to

0:04:23.720 --> 0:04:25.240
<v Speaker 1>put up the money. So Britain it was the same

0:04:25.240 --> 0:04:27.440
<v Speaker 1>in nineteen twenty nine. People are to put up the

0:04:27.480 --> 0:04:29.480
<v Speaker 1>money for Business Week in a way they wouldn't have

0:04:29.520 --> 0:04:32.039
<v Speaker 1>been able to otherwise, And I think, just to be clear,

0:04:32.080 --> 0:04:34.280
<v Speaker 1>you know, business weeks still exists, and money.

0:04:34.080 --> 0:04:34.960
<v Speaker 2>Weeks still exists.

0:04:35.000 --> 0:04:39.120
<v Speaker 1>You know you can survive these things exactly. Things survivable. Anyway,

0:04:39.400 --> 0:04:42.360
<v Speaker 1>Back to earnings, Back to earnings. Everything that you will

0:04:42.360 --> 0:04:44.080
<v Speaker 1>have received in the last couple of days, John, and

0:04:44.080 --> 0:04:45.960
<v Speaker 1>every single thing that I have received in the last

0:04:46.000 --> 0:04:49.719
<v Speaker 1>couple of days is all about all about earnings and

0:04:50.160 --> 0:04:52.360
<v Speaker 1>how everything is fine, and how s and P five

0:04:52.440 --> 0:04:54.240
<v Speaker 1>hundred earnings are going to This is a good one.

0:04:54.279 --> 0:04:55.800
<v Speaker 1>I can't remember who this came from. S and P

0:04:55.880 --> 0:04:58.200
<v Speaker 1>five hundred earnings growth about to break out on the

0:04:58.279 --> 0:05:00.360
<v Speaker 1>upside of a ninety year annal.

0:05:01.720 --> 0:05:02.160
<v Speaker 2>Wow.

0:05:02.320 --> 0:05:05.440
<v Speaker 1>Wow, you know, it's not just big take, it's not

0:05:05.520 --> 0:05:09.440
<v Speaker 1>just big AI across the board. Across the board, we're

0:05:09.440 --> 0:05:12.560
<v Speaker 1>seeing earnings surprises. So it's all marvelous. So from the

0:05:12.600 --> 0:05:15.159
<v Speaker 1>point of view of most people looking at this, they're like, well,

0:05:16.000 --> 0:05:19.080
<v Speaker 1>you know, stop, prizes are based on expected forward earnings.

0:05:19.120 --> 0:05:22.000
<v Speaker 1>Expected for WOD earnings are great, so everything is absolutely fine.

0:05:22.040 --> 0:05:24.240
<v Speaker 1>I did see one, I'm kind one which pointed out

0:05:24.240 --> 0:05:28.359
<v Speaker 1>that given what's going on with earnings, the peg ratio,

0:05:28.760 --> 0:05:31.400
<v Speaker 1>so the forward pe which is divided by long term

0:05:31.400 --> 0:05:34.640
<v Speaker 1>long term earning growth is down to only just over one.

0:05:35.000 --> 0:05:36.360
<v Speaker 1>And back in the old days, we used to say

0:05:36.400 --> 0:05:39.039
<v Speaker 1>if the peg ratio was one, everything was fine. So

0:05:39.120 --> 0:05:42.840
<v Speaker 1>there you go, everything is fine unless earnings growth expectations

0:05:42.839 --> 0:05:43.200
<v Speaker 1>are wrong.

0:05:44.080 --> 0:05:47.320
<v Speaker 2>Yeah, I think I think we can run this. Why not, No,

0:05:47.760 --> 0:05:50.279
<v Speaker 2>just just say yeah, we'll get out there and buy

0:05:50.600 --> 0:05:53.080
<v Speaker 2>go go, go crazy guys, not yourself.

0:05:53.120 --> 0:05:57.800
<v Speaker 1>So although also looking back, I was looking back because

0:05:58.360 --> 0:05:59.560
<v Speaker 1>you know, you look at it and you think, well,

0:05:59.640 --> 0:06:01.960
<v Speaker 1>is this the end of the sixties, Is this like

0:06:02.240 --> 0:06:05.640
<v Speaker 1>the seventies? Is it possible that, in fact, earning's growth

0:06:05.800 --> 0:06:09.800
<v Speaker 1>was really great just before everything went wrong in the

0:06:09.880 --> 0:06:13.919
<v Speaker 1>nineteen seventies. And guess what, Yeah, yeah, yeah, here we

0:06:13.960 --> 0:06:17.919
<v Speaker 1>are rhyming away, rhyming away. So the whole thing behind

0:06:17.960 --> 0:06:22.279
<v Speaker 1>this time is different because record high earnings same in

0:06:22.320 --> 0:06:26.240
<v Speaker 1>the nineteen sixties, coming into the nineteen into nineteen sixty nine,

0:06:26.360 --> 0:06:30.120
<v Speaker 1>record high earnings coming into nineteen seventy, earnings fell back.

0:06:30.240 --> 0:06:33.480
<v Speaker 1>Inflation starts to take off towards the end of the

0:06:33.560 --> 0:06:36.360
<v Speaker 1>nineteen sixties, and then you move into this environment in

0:06:36.400 --> 0:06:40.159
<v Speaker 1>the nineteen seventies where, by the way, earnings kept rising rising.

0:06:40.240 --> 0:06:44.800
<v Speaker 1>Ears was so triple during the nineteen seventies, but the

0:06:44.839 --> 0:06:47.960
<v Speaker 1>market as a whole, the US market went absolutely nowhere

0:06:48.000 --> 0:06:49.719
<v Speaker 1>in that whole decades. Of course, you lot to book

0:06:49.720 --> 0:06:50.200
<v Speaker 1>part of money.

0:06:50.200 --> 0:06:53.280
<v Speaker 2>In real terms, it was massively the eighties, wasn't it.

0:06:53.480 --> 0:06:55.600
<v Speaker 2>The pee bit was the bit that.

0:06:55.560 --> 0:07:00.000
<v Speaker 1>Went through, So you know, the earnings can't save you

0:07:00.200 --> 0:07:02.760
<v Speaker 1>when sentiment turns and when inflation turns. Was kind of

0:07:02.800 --> 0:07:14.680
<v Speaker 1>my point. You've been writing about something much more interesting,

0:07:14.720 --> 0:07:17.320
<v Speaker 1>and I want to talk about that because regular listeners

0:07:17.320 --> 0:07:20.640
<v Speaker 1>and readers will remember the challenge set to me by

0:07:20.640 --> 0:07:23.160
<v Speaker 1>our colleagues in America, and was it last year? Wasn't

0:07:23.160 --> 0:07:24.680
<v Speaker 1>it at the end of last year to go out

0:07:24.720 --> 0:07:28.840
<v Speaker 1>and buy a single share in Ai so that I

0:07:28.840 --> 0:07:32.240
<v Speaker 1>would have it when the great IPOs came and it

0:07:32.280 --> 0:07:34.840
<v Speaker 1>turned out it was impossible to buy sharing Ai, which

0:07:34.960 --> 0:07:38.440
<v Speaker 1>open Ai, which I think I'm hotly grateful really, but

0:07:38.480 --> 0:07:42.920
<v Speaker 1>there you have views on those IPOs, John Well, I'd.

0:07:42.640 --> 0:07:45.320
<v Speaker 2>Just say it's really interesting because one of the things

0:07:45.320 --> 0:07:48.160
<v Speaker 2>that I think it's easy to forget is that stock markets,

0:07:48.200 --> 0:07:51.200
<v Speaker 2>like any other market, the supply, the overall supply of

0:07:51.320 --> 0:07:57.160
<v Speaker 2>stuff actually motels. And it was actually really convenient because

0:07:58.120 --> 0:08:01.240
<v Speaker 2>a colleagues Simon Waite will following the kind of very

0:08:01.320 --> 0:08:04.600
<v Speaker 2>very serious side of the business. He's the kind of

0:08:04.960 --> 0:08:07.240
<v Speaker 2>he writes a column called Microscope, which I think only

0:08:07.240 --> 0:08:10.840
<v Speaker 2>goes to the terminal subscribers. But he was writing about

0:08:11.680 --> 0:08:15.040
<v Speaker 2>share buybacks, and he was making the point that share

0:08:15.080 --> 0:08:18.920
<v Speaker 2>buybacks are the biggest source in the US market of

0:08:19.800 --> 0:08:23.840
<v Speaker 2>equity coming out of the market of de equitization, and

0:08:24.000 --> 0:08:26.440
<v Speaker 2>on an annual basis, simply going back to you know,

0:08:26.560 --> 0:08:28.840
<v Speaker 2>two thousand, there's only been three years in which the

0:08:28.960 --> 0:08:31.720
<v Speaker 2>net equity supply, as in the amount of new equity

0:08:32.000 --> 0:08:35.920
<v Speaker 2>hitting the market, actually was positive. And those years were two,

0:08:36.559 --> 0:08:40.600
<v Speaker 2>two thousand and nine, and twenty twenty. So clearly all

0:08:40.679 --> 0:08:44.200
<v Speaker 2>bad years for the market are all crashy years. And

0:08:44.240 --> 0:08:45.760
<v Speaker 2>one of the points he was making was that this

0:08:45.840 --> 0:08:48.839
<v Speaker 2>year we're sort of expected to have records shared buybacks,

0:08:48.880 --> 0:08:54.640
<v Speaker 2>but share buybacks that are announced very rarely actually are

0:08:54.640 --> 0:08:57.960
<v Speaker 2>followed through on. So you can't guarantee that we're going

0:08:58.000 --> 0:09:00.520
<v Speaker 2>to get this number of buybacks. And what were you know,

0:09:00.600 --> 0:09:03.800
<v Speaker 2>all of the you know, investment and all the rest

0:09:03.840 --> 0:09:06.760
<v Speaker 2>of the companies are doing. Chances are that perhaps these

0:09:06.760 --> 0:09:09.600
<v Speaker 2>buybacks are disappoint So then I was thinking on top

0:09:09.679 --> 0:09:14.000
<v Speaker 2>of this, we've got just an absolute flood of mega

0:09:14.360 --> 0:09:17.560
<v Speaker 2>cap IPOs coming in the summer. So SpaceX is the

0:09:17.600 --> 0:09:20.800
<v Speaker 2>obvious one, but then obviously there's veryousai companies, and then

0:09:20.800 --> 0:09:23.160
<v Speaker 2>there's you know, lots of other stuff we'll probably be

0:09:23.240 --> 0:09:25.640
<v Speaker 2>hoping to get out of the door, Like if SpaceX

0:09:25.760 --> 0:09:28.920
<v Speaker 2>launches and it's really you know, successful, then there'll be

0:09:28.920 --> 0:09:31.000
<v Speaker 2>a que out of the door for all this stuff

0:09:31.000 --> 0:09:34.080
<v Speaker 2>that the private equity guys have you know, been trying

0:09:34.120 --> 0:09:37.920
<v Speaker 2>to offload with no success. And so what I thought

0:09:37.960 --> 0:09:40.320
<v Speaker 2>was interesting is we compare this to two two thousand.

0:09:41.000 --> 0:09:43.240
<v Speaker 2>In two thousand, people often say they're not there isn't

0:09:43.240 --> 0:09:45.960
<v Speaker 2>a trigger for the dot com bubble bursting, But actually

0:09:46.040 --> 0:09:50.360
<v Speaker 2>the the obvious one to point to is the fact

0:09:50.360 --> 0:09:53.160
<v Speaker 2>there was an awful lot of IPOs and then the

0:09:53.200 --> 0:09:56.160
<v Speaker 2>people who were the founders of those companies and employees

0:09:56.200 --> 0:09:57.840
<v Speaker 2>of those companies they had to have they had to

0:09:57.880 --> 0:10:00.120
<v Speaker 2>hold their shares for six months and then and then

0:10:00.200 --> 0:10:01.880
<v Speaker 2>as soon as the six months was up, they all

0:10:01.920 --> 0:10:04.480
<v Speaker 2>were like, I'm getting out of here, and they sold off.

0:10:04.679 --> 0:10:07.680
<v Speaker 2>And actually that's when Sir John Templeton did what was

0:10:07.679 --> 0:10:10.559
<v Speaker 2>probably the best shot trade like in history off the

0:10:10.600 --> 0:10:12.840
<v Speaker 2>back of this thing. He made like a billion dollars

0:10:13.280 --> 0:10:16.040
<v Speaker 2>by knowing when these IPO lockups were up and just

0:10:16.080 --> 0:10:17.880
<v Speaker 2>betting across a load of them the market was going

0:10:17.960 --> 0:10:21.720
<v Speaker 2>to collapse, and he absolutely coined it. Most of us

0:10:21.720 --> 0:10:24.400
<v Speaker 2>are not him, but yes, So it's a long story

0:10:24.440 --> 0:10:28.160
<v Speaker 2>short that I'm wondering what will happen when a flood

0:10:28.440 --> 0:10:31.720
<v Speaker 2>of equity kind of hits a market that is currently

0:10:31.800 --> 0:10:34.880
<v Speaker 2>hungry for it, but then maybe in six months time

0:10:35.000 --> 0:10:38.720
<v Speaker 2>is getting a bit of indigestion. And then on top

0:10:38.800 --> 0:10:42.640
<v Speaker 2>of that, you're getting some some marked to market values

0:10:43.480 --> 0:10:47.160
<v Speaker 2>for assets that previously been privately held. And at first

0:10:47.160 --> 0:10:49.719
<v Speaker 2>it might be okay, but Toular SpaceX goes well. But

0:10:49.760 --> 0:10:52.280
<v Speaker 2>if it all starts to wilt, then all of these

0:10:52.360 --> 0:10:54.880
<v Speaker 2>kind of like private companies that are still being held

0:10:54.960 --> 0:10:57.160
<v Speaker 2>by these you know, by these funds that are struggling,

0:10:57.200 --> 0:11:00.319
<v Speaker 2>they're already struggling. They're gonna have to turn them around

0:11:00.400 --> 0:11:03.560
<v Speaker 2>and say, actually, this isn't worth as much as we'd

0:11:03.640 --> 0:11:05.400
<v Speaker 2>kind of hoped it was going to be worth. And

0:11:05.480 --> 0:11:08.080
<v Speaker 2>all other clients are going to be sitting the going actually, sorry, guys,

0:11:08.080 --> 0:11:10.280
<v Speaker 2>we're kind of done with this. Now you've had like

0:11:10.360 --> 0:11:13.559
<v Speaker 2>five or six years of stuff going through the pipeline,

0:11:13.600 --> 0:11:16.280
<v Speaker 2>and it's not getting any better. We want our money back.

0:11:16.600 --> 0:11:18.439
<v Speaker 2>So I'm wondering if you kind of get an end

0:11:18.640 --> 0:11:21.480
<v Speaker 2>to the kind of endless extend and pretend on the

0:11:21.480 --> 0:11:25.000
<v Speaker 2>private asset side as well at that point, maybe that's

0:11:25.040 --> 0:11:28.840
<v Speaker 2>the bear case. I don't know, it's the most convincing

0:11:28.960 --> 0:11:30.719
<v Speaker 2>bear scenario working come up with at the moment.

0:11:30.800 --> 0:11:33.440
<v Speaker 1>Well, it is because it's happened before, hasn't it. Yeah,

0:11:33.480 --> 0:11:36.560
<v Speaker 1>And let's go back. Have you looked at any of

0:11:36.600 --> 0:11:38.720
<v Speaker 1>the other big bear markets to see if there's one

0:11:38.760 --> 0:11:40.800
<v Speaker 1>of those big supply surgers before them all?

0:11:41.480 --> 0:11:43.800
<v Speaker 2>I mean that's a good point. I mean I haven't

0:11:43.880 --> 0:11:46.920
<v Speaker 2>because I guess two thousand and seven I kind of

0:11:46.920 --> 0:11:50.760
<v Speaker 2>think of as being something completely different. I mean, you

0:11:50.880 --> 0:11:55.200
<v Speaker 2>usually see big deals being done before bear markets, but

0:11:55.559 --> 0:11:58.520
<v Speaker 2>I went I said, most cases, they're not so much

0:11:58.520 --> 0:12:02.520
<v Speaker 2>are triggered as a symptom. Yeah, everyone's got really over excited.

0:12:02.600 --> 0:12:04.800
<v Speaker 2>But is this sort of big can I equity supply

0:12:04.880 --> 0:12:08.160
<v Speaker 2>I think is quite a significant thing in two thirsds

0:12:08.200 --> 0:12:10.200
<v Speaker 2>differently when it stands out to me, have you seen

0:12:10.240 --> 0:12:11.840
<v Speaker 2>any others that may be similar?

0:12:12.200 --> 0:12:14.959
<v Speaker 1>Well, I haven't, but I think it's worth looking at.

0:12:14.960 --> 0:12:17.439
<v Speaker 1>I think we'll offer this to one of our one

0:12:17.480 --> 0:12:20.400
<v Speaker 1>of our professional listeners for free. You know, please go

0:12:20.440 --> 0:12:22.400
<v Speaker 1>out and do the analysis for us and get back

0:12:22.400 --> 0:12:24.199
<v Speaker 1>to us and let us know, because that would work

0:12:24.240 --> 0:12:27.000
<v Speaker 1>a lot better for us than having to do it ourselves, right.

0:12:26.920 --> 0:12:32.440
<v Speaker 2>John, Definitely, definitely, and you give them something to do, definitely.

0:12:35.160 --> 0:12:37.000
<v Speaker 1>Right. What else have you been looking at this week?

0:12:37.120 --> 0:12:40.000
<v Speaker 1>I mean we're just for just so you know, listeners,

0:12:40.040 --> 0:12:42.680
<v Speaker 1>John and I are talking on the day of the

0:12:42.760 --> 0:12:45.960
<v Speaker 1>UK Council elections and Scottish and Welsh elections, so we

0:12:45.960 --> 0:12:47.760
<v Speaker 1>can't talk about the things that we really want to

0:12:47.760 --> 0:12:51.120
<v Speaker 1>talk about today. You know, we're distracting ourselves with this

0:12:51.280 --> 0:12:53.480
<v Speaker 1>AI bubble nonsense when in fact, of course we really

0:12:53.480 --> 0:12:55.760
<v Speaker 1>want to talk about the UK bond market and stuff

0:12:55.800 --> 0:12:57.040
<v Speaker 1>like that, but just not today.

0:12:57.280 --> 0:13:00.280
<v Speaker 2>Well someprise, it'd be kind because I think have looked

0:13:00.280 --> 0:13:03.160
<v Speaker 2>to this week was the UK bord market, and I

0:13:03.160 --> 0:13:06.480
<v Speaker 2>guess with that it's not so much. I mean, the

0:13:06.480 --> 0:13:10.560
<v Speaker 2>political uncertainty obviously adds little fresh songs to all of that,

0:13:11.000 --> 0:13:14.000
<v Speaker 2>but I think there's a more fundamental issue, which is

0:13:14.040 --> 0:13:17.640
<v Speaker 2>the UK is very inflation prone and we talked about

0:13:17.640 --> 0:13:21.559
<v Speaker 2>this before because of really because of poor governance over

0:13:22.240 --> 0:13:25.240
<v Speaker 2>a very long period of time and bad policy making.

0:13:26.040 --> 0:13:28.720
<v Speaker 2>And as Andy Haldane said on the podcast, you know

0:13:28.760 --> 0:13:30.959
<v Speaker 2>a couple of weeks ago, there's enough a lot of

0:13:30.960 --> 0:13:33.480
<v Speaker 2>potential in the economy that could be unlocked just by

0:13:34.240 --> 0:13:38.559
<v Speaker 2>improving the policy making. And the unfortunate thing is to me,

0:13:38.640 --> 0:13:42.719
<v Speaker 2>I think obviously we don't know what will happen as

0:13:42.720 --> 0:13:47.160
<v Speaker 2>they're going to the polls. But whatever happens, either k

0:13:47.280 --> 0:13:50.480
<v Speaker 2>Stamer steps down or he doesn't, and whoever places will

0:13:50.880 --> 0:13:55.600
<v Speaker 2>probably be within the same level of badness. You know,

0:13:55.640 --> 0:13:57.400
<v Speaker 2>maybe one of them might be slightly better, one of

0:13:57.440 --> 0:14:00.839
<v Speaker 2>them might be significantly worse. But there's not you know,

0:14:00.880 --> 0:14:03.520
<v Speaker 2>we're still getting have the same kind of approach that

0:14:04.160 --> 0:14:06.760
<v Speaker 2>if it's not walking, you need you either slap a

0:14:06.800 --> 0:14:09.400
<v Speaker 2>place control that a new law or as opposed to

0:14:09.880 --> 0:14:11.439
<v Speaker 2>maybe if we sit back, I can go out of

0:14:11.480 --> 0:14:14.960
<v Speaker 2>the way, you know, and let it kind of energy

0:14:15.000 --> 0:14:18.800
<v Speaker 2>supply be more rationally produced, you know, and will uply

0:14:18.840 --> 0:14:21.720
<v Speaker 2>not see et cetera, et cetera. So I think we

0:14:21.840 --> 0:14:25.560
<v Speaker 2>may be stuck with poor policy making at least until

0:14:25.560 --> 0:14:26.600
<v Speaker 2>the next general election.

0:14:26.920 --> 0:14:29.920
<v Speaker 1>Yeah, I mean, it's interesting mentioning price controls because price controls,

0:14:29.920 --> 0:14:31.840
<v Speaker 1>and we've discussed before, they just pop up all over

0:14:31.880 --> 0:14:34.040
<v Speaker 1>the place now, and that brings us back to thinking

0:14:34.080 --> 0:14:38.000
<v Speaker 1>about how inflation develops and how long it could last.

0:14:38.000 --> 0:14:40.200
<v Speaker 1>I mean, it's very unusual in economies that have had

0:14:40.280 --> 0:14:42.880
<v Speaker 1>higher and expected higher than expected inflation for four or

0:14:42.880 --> 0:14:45.080
<v Speaker 1>five years or whatever, as we have had, as and

0:14:45.280 --> 0:14:46.760
<v Speaker 1>as they have had in the US, by the way,

0:14:46.920 --> 0:14:49.160
<v Speaker 1>for inflation just to put itself together and come back

0:14:49.200 --> 0:14:52.440
<v Speaker 1>to target just like that. That's really very unusual, and

0:14:52.520 --> 0:14:57.040
<v Speaker 1>particularly I would say unlikely in a political environment when

0:14:57.080 --> 0:15:01.360
<v Speaker 1>the appetite to keep inflation low is kind of gone,

0:15:01.480 --> 0:15:06.360
<v Speaker 1>the appetite to constrain spending, the appetite to look at

0:15:06.400 --> 0:15:09.040
<v Speaker 1>the source of inflation, which in the UK's cases is

0:15:09.040 --> 0:15:11.760
<v Speaker 1>all sorts of things, but out of control spending, endless

0:15:11.760 --> 0:15:16.240
<v Speaker 1>price controls, less regulation, minimum wages and all this kind

0:15:16.280 --> 0:15:21.560
<v Speaker 1>of thing. They're all embedded, and it's almost impossible to

0:15:21.880 --> 0:15:24.360
<v Speaker 1>imagine a new government coming in and saying, actually, do

0:15:24.400 --> 0:15:27.880
<v Speaker 1>you know what, let's stop covering everything up with price

0:15:27.920 --> 0:15:30.600
<v Speaker 1>controls of various sorts and let's get to the bottom

0:15:30.920 --> 0:15:33.120
<v Speaker 1>of inflation. That's not going to happen.

0:15:33.880 --> 0:15:35.520
<v Speaker 2>Yeah, I mean it's I guess there's that whole thing,

0:15:35.560 --> 0:15:40.240
<v Speaker 2>But there's not been any any voter base now for

0:15:40.440 --> 0:15:45.960
<v Speaker 2>getting ready inflation. And I guess it's just the UK.

0:15:45.920 --> 0:15:47.440
<v Speaker 1>By the way, I mean, I think that's at this

0:15:47.480 --> 0:15:49.520
<v Speaker 1>point it's a Western issue. There is no there is

0:15:49.560 --> 0:15:52.760
<v Speaker 1>no appetite anywhere for dealing.

0:15:52.440 --> 0:15:55.440
<v Speaker 2>With the core of the problem of all the countries. Actually,

0:15:55.440 --> 0:16:00.880
<v Speaker 2>the UK's at least it's theoretical fiscal pathway is actually

0:16:01.080 --> 0:16:03.080
<v Speaker 2>pretty good compared to a lot of them in the

0:16:03.400 --> 0:16:07.400
<v Speaker 2>You know that's nonsense, John, Yeah, yeah, but at least

0:16:07.840 --> 0:16:13.720
<v Speaker 2>or not not at least, but at least discussion about it.

0:16:13.840 --> 0:16:17.280
<v Speaker 1>Any one believes it. If anyone believed it, would guilt

0:16:17.360 --> 0:16:19.120
<v Speaker 1>guild hells be so high.

0:16:19.160 --> 0:16:21.400
<v Speaker 2>Well, I mean that's true a lot, But I mean

0:16:21.440 --> 0:16:22.840
<v Speaker 2>the only thing I would say, but get yours in

0:16:23.120 --> 0:16:27.440
<v Speaker 2>wild a function of inflation rather than panicking about the

0:16:28.520 --> 0:16:34.000
<v Speaker 2>deficit connected. Yeah, but the things we've got this inflation

0:16:34.160 --> 0:16:37.320
<v Speaker 2>has consistently been about one percentage point higher than anywhere else.

0:16:37.600 --> 0:16:39.480
<v Speaker 2>So if you want a real interest rate from a

0:16:39.520 --> 0:16:41.840
<v Speaker 2>guilt you have to charge that people who issue it

0:16:42.120 --> 0:16:45.720
<v Speaker 2>kind of more to compensate for that. And I mean, yes,

0:16:45.800 --> 0:16:47.960
<v Speaker 2>that's you know, you can argue the inflation is partly

0:16:48.000 --> 0:16:51.360
<v Speaker 2>because we've never had kind of brilliantly controlled public finances,

0:16:51.400 --> 0:16:53.720
<v Speaker 2>but a lot of it also comes down to the

0:16:53.960 --> 0:16:55.800
<v Speaker 2>kind of price control side of things that we were

0:16:55.840 --> 0:16:59.120
<v Speaker 2>talking about. Whereas, yes, so even even if we had,

0:16:59.320 --> 0:17:03.040
<v Speaker 2>you know, kind of much healthier looking public finances, would

0:17:03.040 --> 0:17:06.000
<v Speaker 2>still be getting charge of the premium because had inflation

0:17:06.080 --> 0:17:09.760
<v Speaker 2>is still higher than it should be an incomparable kind

0:17:09.800 --> 0:17:14.080
<v Speaker 2>of economies. I think something like CPI's averaged three percent

0:17:14.160 --> 0:17:17.399
<v Speaker 2>since twenty ten, yeah, you know, ten years of that

0:17:17.600 --> 0:17:21.000
<v Speaker 2>was the most disinflation in the decade you know, we've

0:17:21.200 --> 0:17:21.840
<v Speaker 2>ever had.

0:17:22.280 --> 0:17:24.280
<v Speaker 1>Yeah, So I mean that's that's what I mean when

0:17:24.280 --> 0:17:26.199
<v Speaker 1>I say it's difficult to imagine it going back to

0:17:26.240 --> 0:17:28.400
<v Speaker 1>two percent. And this is the whole idea that, oh,

0:17:28.480 --> 0:17:31.040
<v Speaker 1>you know, people's expectations is still anchored, are they?

0:17:31.200 --> 0:17:34.520
<v Speaker 2>Are they? Though I don't place a lot of stocking expectations,

0:17:34.560 --> 0:17:37.439
<v Speaker 2>I must admit, just because I think it's if you

0:17:37.480 --> 0:17:40.600
<v Speaker 2>put too much stock in expectations, then that always encourages

0:17:40.640 --> 0:17:43.560
<v Speaker 2>politicians to think that they can somehow wrestle control of

0:17:43.600 --> 0:17:47.199
<v Speaker 2>the narrative just by talking rather than acting. But people's

0:17:47.240 --> 0:17:51.240
<v Speaker 2>expectations usually reflect an underlying reality, which is stuff is

0:17:51.320 --> 0:17:55.240
<v Speaker 2>just getting more and more Expensivelessly.

0:17:54.240 --> 0:17:57.560
<v Speaker 1>You expect what you just had in the mayor r Yeah, okay,

0:17:57.560 --> 0:17:59.679
<v Speaker 1>well that was another optimistic chat, John. I enjoyed that.

0:18:01.400 --> 0:18:03.960
<v Speaker 1>Only we could do a depressing podcast when Mark is

0:18:03.960 --> 0:18:05.679
<v Speaker 1>it hitting new hires all around us and there's a

0:18:05.680 --> 0:18:07.600
<v Speaker 1>possibility of a peace deal in the Middle East on

0:18:07.640 --> 0:18:10.840
<v Speaker 1>the on the table, it's we've got to try harder

0:18:10.840 --> 0:18:13.280
<v Speaker 1>on the optimism. Maybe some more optimistic guests would be

0:18:13.320 --> 0:18:15.520
<v Speaker 1>a good thing. We'll get that Eddie id back on again.

0:18:15.560 --> 0:18:18.760
<v Speaker 1>I think, yeah, yeah, I think we better leave it there.

0:18:19.240 --> 0:18:26.640
<v Speaker 2>Thank you, John, Thanks Mail, thanks.

0:18:26.440 --> 0:18:28.479
<v Speaker 1>For listening to this weeks Marin Talks Money Debrief. If

0:18:28.480 --> 0:18:30.760
<v Speaker 1>you like our show, rate review, and subscribe whereever you

0:18:30.760 --> 0:18:33.800
<v Speaker 1>listen to podcasts. This episode was produced by Moses andm

0:18:33.800 --> 0:18:36.920
<v Speaker 1>and Summersadi. As always, questions and comments on this show

0:18:36.960 --> 0:18:39.000
<v Speaker 1>and all our shows are welcome. Our show email is

0:18:39.040 --> 0:18:41.200
<v Speaker 1>Merimney at Bloomberg dot net.