Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Ad Thoughts Podcast.
Speaker 2: I'm Tracy Alloway.
Speaker 3: And I'm Joe Wisenthal.
Speaker 2: Joe, I think I think a lot of people don't
Speaker 2: understand the role of bears in finance and markets.
Speaker 3: It's to create headlines for tweeting, right.
Speaker 2: Well, technically it's just sell newsletter.
Speaker 3: I was going to say it's to get emails opened, right,
Speaker 3: that's right.
Speaker 2: So I think you know, being a bear who's selling
Speaker 2: a newsletter, we can all kind of see the business
Speaker 2: model there. But if you're an analyst at a big
Speaker 2: sell side firm and you're known as a bear, that
Speaker 2: seems incredibly difficult to me, because, like the tendency on
Speaker 2: Wall Street and investment in finance is towards optimism, right,
Speaker 2: you have to place bets on the future, you have
Speaker 2: to put your money to work. And if you're managing
Speaker 2: to be a sort of like long run bear and
Speaker 2: a big cell side institution, that's pretty impressive to me.
Speaker 3: Oh so you're selling, Yes, it is, you're selling. They
Speaker 3: call it the cell side. And if you know there's
Speaker 3: all these financial instruments that the financial institution has and
Speaker 3: you're the bear. It's like, well, I'm not going to
Speaker 3: buy anything, you know, it's the cell side. You're supposed
Speaker 3: to have something to sell, and that's other people to sell.
Speaker 2: The clue is truly in the name. But the other
Speaker 2: thing that's very impressive is if you're a long run
Speaker 2: bear at a cell side institution who also manages to
Speaker 2: be the top ranked macro analyst in your category for
Speaker 2: thirteen years in a row. That's pretty impressive, right, It
Speaker 2: is impressive.
Speaker 3: And this gets to another important point, which is people
Speaker 3: like to read. And I think about this even with
Speaker 3: podcasts and other forms of any sort of media, whether
Speaker 3: it's formal media and a PDF that a bank cent
Speaker 3: sells or a news organization. People like to consume ideas.
Speaker 3: And it doesn't mean they're going to consume the ideas
Speaker 3: and say, oh, this was convincing by sell. But they
Speaker 3: like to hear a range of ideas. They like to
Speaker 3: have their thought process influenced, they like to stress test.
Speaker 2: Well, this is what I was going to say. Like
Speaker 2: to me, the role of a true bear on Wall
Speaker 2: Street is for big investors and institutional clients to actually
Speaker 2: test some of their thinking. You know, if you have
Speaker 2: a bunch of analysts who are trying to pitch you
Speaker 2: tech stocks at the moment, like you want to hear
Speaker 2: an opposing viewpoint that says, well, maybe here is the
Speaker 2: downside scenario.
Speaker 3: Well, here's the other thing right now we're recording this
Speaker 3: in early May twenty twenty six, which is that equity
Speaker 3: markets around the world are very high. Some would say
Speaker 3: bizarrely high, but they're very high for various reasons. We
Speaker 3: could get into. Bonds have been selling off very much,
Speaker 3: and that's sort of the story. We're here in the
Speaker 3: UK right now, and the headlines are all about generally
Speaker 3: how much guilt yields keep spiking. But we're in this
Speaker 3: moment which I would say there is a real mismatch,
Speaker 3: but between I would say gloom which you could pick
Speaker 3: your poison. Why are you gloomy? You're gloomy because the
Speaker 3: Ais are going to take us, are going to destroy
Speaker 3: the world. You're gloomy because the war and around. You're
Speaker 3: gloomy because high deficits, et cetera. You're gloomy because politics
Speaker 3: in so many countries seems to be deteriorated. There's plenty
Speaker 3: of reason for gloom out there, and yet you know
Speaker 3: you're losing if you're not in the stock market, et cetera.
Speaker 3: It is just a very weird time. But yes, there
Speaker 3: is this weird mismatch depending on how you look at it,
Speaker 3: between sentiment across any many different attempts to measure a
Speaker 3: sentiment and what least certain parts of the market are doing.
Speaker 2: Yeah, I think that's exactly right. And also, you know
Speaker 2: you mentioned bond yields going up, So we're recording this
Speaker 2: on May sixth, the thirty year UK gilt. We're in
Speaker 2: London still, by the way, hit like its highest since
Speaker 2: nineteen ninety eight or something yesterday, And you're absolutely right,
Speaker 2: there does seem to be a tension between all these
Speaker 2: little glimmers of an inflation that are out there and
Speaker 2: what's going on in the equity market, because you would
Speaker 2: expect with rates possibly going up that equities were going
Speaker 2: to take a hit. But anyway, we do in fact
Speaker 2: have the perfect guest, right, someone who is very well
Speaker 2: known not just for being a bear, but also for
Speaker 2: having very long term, sort of paradigm views on the
Speaker 2: relationship between bonds and equities.
Speaker 3: Someone we've been reading for a very long time. Prices.
Speaker 2: We finally convinced him to come on the podcast. I
Speaker 2: gave it away earlier when I said the top ranked
Speaker 2: Extel Survey macro analyst thirteen times in a row. But
Speaker 2: we are, of course going to be speaking with Albert Edwards,
Speaker 2: who is the global strategist over at SoC GEN. Thank
Speaker 2: you so much for coming on off.
Speaker 4: It's a pleasure. I don't get that much. They've let
Speaker 4: you out of the bear exactly.
Speaker 3: Right, that's right.
Speaker 2: Why don't you go ahead and explain? Well, first of all,
Speaker 2: I should ask when people introduce you as a well
Speaker 2: known bear, does it great you the way it seems
Speaker 2: to great some other people I remember Nurial Rubini would
Speaker 2: always go upset if you call them doctor Doom. Do
Speaker 2: you get upset?
Speaker 4: No, I'm please be introduced at all, and anyone's speaking
Speaker 4: to me quite frankly, okay.
Speaker 2: Is it a deserved reputation.
Speaker 4: It's deserved in the sense that the media has more
Speaker 4: latched onto, or had more latched onto, my bearish views
Speaker 4: on equity markets, but not my bullish views on government bonds.
Speaker 4: Now I joined the cell side, so I've been working
Speaker 4: in finance since nineteen eighty two. I joined the Bank
Speaker 4: of England just over the road here. But I join
Speaker 4: after his little stint on the buy side, which is why,
Speaker 4: by the way, I write such short notes, because I've
Speaker 4: actually had to read these notes on the byside over
Speaker 4: the years, and I know the clients and readers aren't
Speaker 4: sitting there waiting for them, and if they can't read
Speaker 4: them in about three four minutes, they're not going to
Speaker 4: read them. They're not going to read them at all.
Speaker 4: But I joined the cell side in nineteen eighty eight,
Speaker 4: at time Waltz became dressner time Walts. I was there
Speaker 4: for almost twenty years, but I saw the back end
Speaker 4: of the Japanese bubble, and I saw the what Richard
Speaker 4: kouat Namura used to describe the balance sheet recession in
Speaker 4: Japan and how it unraveled and by the time it
Speaker 4: got to and how Western economists were saying, you're doing
Speaker 4: it all wrong in Japan. You should be just liquidating
Speaker 4: the capital stock and get to get rid of this deflation.
Speaker 4: And I was thinking, well, firstly, actually, this what's happening
Speaker 4: in Japan, is there just ahead of you, ten years
Speaker 4: ahead of you in the West, because their bubble was
Speaker 4: a lot, their credit bubble was a lot earlier, and
Speaker 4: when it bursts in the West, you won't be doing
Speaker 4: what you're recommending that they do. You'll you'll be you'll
Speaker 4: be slashing raids, you'll be doing everything to stop recessions.
Speaker 4: But the key thing about Japan, so the back end
Speaker 4: of nineteen ninety eight, when I thought this is coming
Speaker 4: to the West, I developed what I call the ice
Speaker 4: Age view, which is secular stagnation thesis, which is next
Speaker 4: essentially Lauren Summer's the excess of savings over investment, driving
Speaker 4: down real yels and bond deals and causing a rerating
Speaker 4: of valuations. But we saw in Japan after a while
Speaker 4: that actually your inflation and bond deals and interstrates would
Speaker 4: carry on coming down, but after what it wouldn't cause
Speaker 4: any more PA expansion. Actually quite the reverse, that inflation
Speaker 4: got so low and so close to deflation it would
Speaker 4: cause PA contraction. So what I was trying to do
Speaker 4: is bolt on a financial market view onto the secular
Speaker 4: stagnation thesis, and that ran all the way from nineteen
Speaker 4: ninety six. I ran with it. I thought it was
Speaker 4: coming immediately after the Asian crisis. You mentioned guilt hell
Speaker 4: as being there higher since nineteen ninety eight. I can
Speaker 4: remember that the aftermath of the Asian crisis, the Russian
Speaker 4: GKO crisis, and this where longevity helps. By the way
Speaker 4: you can I might not be able to remember what
Speaker 4: happened yesterday, but I can remember twenty years ago quite
Speaker 4: quite well. And then from two thousand onwards you started
Speaker 4: to see as bond Yell's got lower problems with merging
Speaker 4: within the equity markets. So that was basically the ice
Speaker 4: age thesis, and it were so. Although I was an
Speaker 4: equity bear and well known for that, I was very
Speaker 4: much a bond bow government bond.
Speaker 3: Bo I'm glad you said, just reflecting. I'm glad you
Speaker 3: said the point about having come from the buyside and
Speaker 3: understood the attention spans of readers and how that informed
Speaker 3: your view of the cell side because that's something that
Speaker 3: I've said or thought many times. Having started my career,
Speaker 3: a lot of what I learned to write was from
Speaker 3: reading cell side research, and it I figured that, Okay,
Speaker 3: the cell side analysts are writing for people who are
Speaker 3: just inundated with notes, right their inboxes are filled with
Speaker 3: all kinds of notes. They must know what the type
Speaker 3: of content that the buyside is willing to read chart
Speaker 3: heavy off in concise, et cetera, and so early on
Speaker 3: in my journalism care I figured, Okay, if this is
Speaker 3: how the cell side writes, it's probably a good idea
Speaker 3: to sort of crib some of these ideas because they
Speaker 3: understand the realities of shortened attention spans and so forth.
Speaker 3: And now with social media, everyone has the attention span
Speaker 3: essentially of a byside trader. What's your job?
Speaker 4: You know?
Speaker 3: Tracy introduced you as strategists, setting aside your views specifically,
Speaker 3: what does success look like? Why do you have a
Speaker 3: role at the bank, and what is the purpose of
Speaker 3: your journey?
Speaker 4: Why am I employed on action?
Speaker 3: And I don't mean that from like why you employed
Speaker 3: like if you've gotten the equity call, et cetera. Why
Speaker 3: is this an important role though to have a bank?
Speaker 4: Well, I remember in the run up to the Nunstack
Speaker 4: bubble bursting, we were having our round table lunches at
Speaker 4: climb Waltz and Tony die Then who was head of
Speaker 4: Phillips and Jewassen Management, who had become bearished too early
Speaker 4: value a bit like Jeremy grant them value orientating and
Speaker 4: his co conspiratorality in Chicago what's his name, Brinson, who
Speaker 4: both had come under the umbrella of UBS. I remember
Speaker 4: him saying to the head of equities at climb Waltz, well,
Speaker 4: I totally agree with what Albert's saying, but why haven't
Speaker 4: you fired him? Because that's what happens to most bears
Speaker 4: or most analysts who get it wrong. Not on the
Speaker 4: bullish side, but if you if you're an economist and
Speaker 4: call a recession on the cell side and you're wrong,
Speaker 4: you're usually out pretty quickly. There's such a bias towards optimism,
Speaker 4: and it's not just confected, it's natural. It's like an
Speaker 4: analyst covering a stock. Inevitably they're going to be usually
Speaker 4: enthusiastic about their sector and stock, so that there is
Speaker 4: a natural bias, and part of my role, I mean,
Speaker 4: I've developed it over the years in that, even when
Speaker 4: I'm getting it wrong, how to avoid getting fired. We
Speaker 4: had an analyst of Climb Waltz in the late nineties.
Speaker 4: It was a tech analyst. He was very bearish on
Speaker 4: nochio and ericson he was right. He was pounding the
Speaker 4: table with analysts with sorry with their clients, and he
Speaker 4: off the clients so much he almost got fired, and
Speaker 4: the secret is to develop strategies. This is my view
Speaker 4: for what it's worth. They know my they can calibrate
Speaker 4: what I'm thinking. I'm not too much in their face.
Speaker 4: I'm not annoying them too much. And I'm a bit
Speaker 4: like I'm a bit like Caesar always used to have
Speaker 4: a slave right behind him whose job it was to
Speaker 4: say to Caesar, you are mortal. You are mortal.
Speaker 2: I'm the slave.
Speaker 4: I'm the wage slave and the actual slave. Often those
Speaker 4: slaves themselves were terminated in pretty horrendous fashion themselves. But
Speaker 4: if the clients, even times for bulls, would want to
Speaker 4: hear what I'm saying just to know what to be
Speaker 4: watching out for in the back and end, they've got
Speaker 4: to be fully invested. They've got to participate. But hey,
Speaker 4: should we you know, we've got to keep dancing as
Speaker 4: the Chuck Prince thing, But should we be dancing near
Speaker 4: the fire escapes or in the center of the room,
Speaker 4: that sort of thing.
Speaker 2: All of that makes a lot of sense, and I
Speaker 2: want to get into the risks that you're seeing now.
Speaker 2: But before we do it, just going back to the
Speaker 2: ice age thesis. So on the equity side, explain what
Speaker 2: went wrong, because this is the thing that you're criticized
Speaker 2: for and you're sort of known for, is you've had
Speaker 2: a bearish view on equities for a very very long time.
Speaker 2: It didn't work out.
Speaker 4: What happened, well, what happened from two thousand onwards. If
Speaker 4: you look at charts of bond eels carrying on falling,
Speaker 4: equity equity yields did start to rise, so you did
Speaker 4: have that exactly what you saw in Japan. What derails
Speaker 4: the de rating of equities, in my view, was certainly
Speaker 4: quanstity of easy. So the degree and the it wasn't
Speaker 4: just used once in two thousand and an eight when
Speaker 4: you were in your heyday. Well you're in your heyday
Speaker 4: now of course, but you in another, had another, another,
Speaker 4: But how it persisted all the way through over the
Speaker 4: next ten years, and that basically inflated and that was
Speaker 4: the job of QI to inflate all asset prices. Where
Speaker 4: the ice age continued to work was within the equity
Speaker 4: market because sectors which were benefited from lower bondie on,
Speaker 4: such as defensives or growth sectors, did extraordinarily well and
Speaker 4: rerated to huge p premiums versus cyclicality or value stop.
Speaker 4: So even though the equity manager might ignore what I'm
Speaker 4: saying at the macro level where the market's not going down,
Speaker 4: actually within the equity market it was still very very relevant.
Speaker 4: This Japanification of the West.
Speaker 3: Feet let's talk about then Japanification and within Japanification, Japan specifically,
Speaker 3: because this is an important there's a lot going on
Speaker 3: right now that's very important. In the twenty tens, the
Speaker 3: JGB market. For a long time, it was characterized as
Speaker 3: the widow maker, right because everyone looked at the size
Speaker 3: of the Japanese debt stock and they say, it's going
Speaker 3: up and up and up. It's big. Japanese debt to
Speaker 3: GDP is getting higher and higher, and yet rates were
Speaker 3: going down. This confused a lot of people. You were
Speaker 3: correct on the call that that was actually sort of irrelevant,
Speaker 3: that actually that stuck could go higher and hire rates
Speaker 3: could keep going down. Japanese yields famously zero, probably negative
Speaker 3: in many instances post COVID. However, that's changed and now Japan,
Speaker 3: as well as every other developed market economy, the rates
Speaker 3: are going up. So this relationship, whatever was going on,
Speaker 3: has flipped. What flipped really post COVID, In your view,
Speaker 3: such that rates are going up all around the world,
Speaker 3: including in Japan, but also especially in the UK. That
Speaker 3: ice age of disinflation and lower rates has truly come
Speaker 3: to an end.
Speaker 4: I mean what flipped in my view was prior to
Speaker 4: the COVID recession. By the way, before the COVID recession,
Speaker 4: I was writing in early twenty twenty, before the pandemic
Speaker 4: came along, that actually the next recession would see a
Speaker 4: transition away from the ISA I was moving and it
Speaker 4: worked for me for quite a long time. But actually
Speaker 4: I was thinking we were going to move to a
Speaker 4: new paradigm and that falling bond of your story was
Speaker 4: going to stop. And the reason was, up until that point,
Speaker 4: quantitative easing had been injected primarily in virtually entirely into
Speaker 4: the veins of wall streets. The idea that the Q
Speaker 4: didn't create inflation was nonsense. He created loads of inflation,
Speaker 4: but the sort of inflation people like in housing, in
Speaker 4: financial assets asset prices, and no one complains about No
Speaker 4: one complains about that unless you don't own the asset
Speaker 4: price is. What it caused was a lot of generational tension,
Speaker 4: with younger people not being able to afford which is
Speaker 4: we can come on too populism later. But one of
Speaker 4: the reasons populism has come along in space, so it
Speaker 4: caused lots of inequality, which even the central banks eventually realized.
Speaker 4: But what I thought would occur was the next one.
Speaker 4: When it came along, you were so close to outright deflation.
Speaker 4: And certainly remember at that time you were having negative bonds,
Speaker 4: so much of the market was negative bond deals. Europe
Speaker 4: had quite clearly fallen into the Japanification trap. The US
Speaker 4: was heading there, I thoughts and predicted that we would
Speaker 4: get a flip over into a modern monetary theory type
Speaker 4: QE where they started injecting money into the veins of
Speaker 4: main streets and a bits fiscal so basically classic tax cuts,
Speaker 4: checks dropping on people's doorsteps, paid for by monetary creation.
Speaker 4: And I didn't foresee clearly the pandemic made the situation,
Speaker 4: the inflationary situation on consumer prices a lot worse because
Speaker 4: of the restricted supply chains. And having read I've got
Speaker 4: a lot of sympathy with the lot of I don't
Speaker 4: tend to have any dogmatic views monetarists, ken zin or whatever.
Speaker 4: I'm quite catholic. I bring all the themes in there's
Speaker 4: quite a lot about MMTR I agree with, but reading
Speaker 4: Stephanie Kelton's book, one thing was absolutely clear. They were saying, yes,
Speaker 4: we can do this, it doesn't create inflation, but when
Speaker 4: you hit capacity constraints, you have to stop doing it.
Speaker 4: And nothing could have been more capacity constrained than global
Speaker 4: economy during the COVID. So in my view, it was
Speaker 4: that crazy to do what they were doing, and it
Speaker 4: was going to create the money. You could see it
Speaker 4: from the broad money growth.
Speaker 3: So just to be clear, and I know you said
Speaker 3: we were going to skip ahead to the populism, which
Speaker 3: is very intertwined. I would say, or many people would say,
Speaker 3: with what's going on with economic policy right now, is
Speaker 3: the failure the basically the premise the government could ever
Speaker 3: stop the fiscal expansion once the capacity constraint is hit.
Speaker 3: So you have the money drops, you have the helicopter drops,
Speaker 3: you have the checks, you have the tax cuts, arguably
Speaker 3: quite justified during the worst of the COVID. Is the
Speaker 3: core analytical error the notion that after you hit that
Speaker 3: capacity constraints, that governments have the internal capacity to say, Okay,
Speaker 3: we've hit that point now where we have to raise
Speaker 3: taxes to stop.
Speaker 2: The check Democratically.
Speaker 3: Democratically elected officials are capable of saying, you know what,
Speaker 3: we've hit these capacity constraints and now we have to
Speaker 3: unwind the checks.
Speaker 4: I don't think that. I don't think congenitoually they are
Speaker 4: able to do that.
Speaker 3: That's what I'm saying, is that where that where the
Speaker 3: analysis breaks.
Speaker 4: Well, that's where the that's where the proscription breaks do
Speaker 4: That's where the future, if you like, is so scary
Speaker 4: because well, actually, in the US, for example, the budget
Speaker 4: deficit attached itself from economic reality before COVID hit in
Speaker 4: chance first term, and that's when you first started seeing
Speaker 4: such a deficits heading to six percent of GDP in
Speaker 4: an absence of a recession or a crisis, and we're
Speaker 4: at seven percent of GDP. I was looking to be
Speaker 4: IMF numbers. Before I came in, you were seven percent
Speaker 4: of GDP. When unemployment is this slow, there's no appetite.
Speaker 4: And if politicians try and do it, and I would
Speaker 4: say part of the problem with the UK at the moment,
Speaker 4: so that yields at twenty twenty eight year highs. It's
Speaker 4: not that they haven't tried to do it. They have
Speaker 4: tried to do it. But if you it's a very
Speaker 4: fine type wrote clackating the bond markets and taking off
Speaker 4: your electorate so much that you're on your way out
Speaker 4: to do Bai. Well, you know you're on your way
Speaker 4: out of government.
Speaker 3: You're saying you're on your way out of the election.
Speaker 4: Taxpayers are some of them are on the way out
Speaker 4: to Dubai and then then then looping back somewhere else
Speaker 4: at the moment, but you're you're out a government, and
Speaker 4: this is the problem. One of the problems for the
Speaker 4: UK government is the electoral electorate won't tolerate unless there's
Speaker 4: a crisis, so almost politicians need a Eurozone type Greek,
Speaker 4: Spanish Italian crisis to be able to implement the measures
Speaker 4: that everyone knows needs to take place, but electorates currently
Speaker 4: have no appetite for I.
Speaker 2: Saw this amazing chart. You probably saw it too because
Speaker 2: it was an Adam Tuosa's newsletter recently, but it was
Speaker 2: from TS Lombard and it showed fiscal support during the
Speaker 2: twenty twenty two energy crisis in Europe as a percentage
Speaker 2: of GDP, and I hadn't realized just how substantial it
Speaker 2: actually was. Like energy tax cuts, and so of course
Speaker 2: the question now is with oil going back up and
Speaker 2: people coming under pressure, if we're going to see that
Speaker 2: same type of fiscal response, I.
Speaker 4: Don't think you can. Well, first of all, it's even
Speaker 4: in Europe. The rise in the gas price is nowhere
Speaker 4: near as bad as it was in twenty twenty two.
Speaker 4: And they will do stuff, and they have done stuff
Speaker 4: in places like Spain, despite the European Commission warning the
Speaker 4: countries that actually you haven't got the buffers to be
Speaker 4: able to do this. They are trying to. They have
Speaker 4: been reducing vat but I quite like quite in the
Speaker 4: US it's somewhat different, just over the saying. I've just
Speaker 4: over in Boston recently. I can see the gas price
Speaker 4: well above two dollars.
Speaker 2: Especially in Massachusetts.
Speaker 4: H yeah, but the natural gas price isn't it hasn't
Speaker 4: really gone up in the US. And winding back to
Speaker 4: that famous statement in the early seventies of this is
Speaker 4: our currency, but your problems to the Europeans, this is
Speaker 4: our war, US war, but it's your problem Europeans and
Speaker 4: especially Asia, particularly Asia which gets so much of its
Speaker 4: derivative chemical supplies out of the Gulf. And I saw
Speaker 4: your chart of the Urea versus the Corn Prize showing
Speaker 4: as absolutely stratospheric. But so much of the so much
Speaker 4: derivative chemical products come out of the Gulf, especially to
Speaker 4: age Asia. I saw that eighty percent of India's ammonia
Speaker 4: comes from the Gulf. Now the Asia is in real,
Speaker 4: real trouble, and this is coming down. I mean, one
Speaker 4: thing I think that's really surprised me in the early
Speaker 4: part of the war was when I looked at five
Speaker 4: year versus five year inflation swaps, They've come down. They
Speaker 4: hadn't started going up. So recently the two year into
Speaker 4: year a shot up, and the five year and five
Speaker 4: years started to go up. The people have started to
Speaker 4: realize this is dragging on. And why the taco your
Speaker 4: your former colleague Rob Armstrong, who invented the taco description,
Speaker 4: why the taco trade isn't working? Here, I saw a
Speaker 4: very nice quip, which is because in RAN's involved, it
Speaker 4: takes two to taco uh and Trump can announce these
Speaker 4: U turns, but they're not effective unless Iran is also
Speaker 4: participating or dancing the same dance. So when I hear
Speaker 4: are ail analysts are commodity analysts on our call the
Speaker 4: equity guys that it's still really bullished. The bond guys
Speaker 4: somewhere between. The commodity guys are basically sobbing into their
Speaker 4: microphones because if they know, they know the inflation coming
Speaker 4: down the track here in fertilizers and food and everything.
Speaker 3: This is the funny thing talking about all the commodity
Speaker 3: guys the doom. It's like it's knocking on our door
Speaker 3: and everyone, we'll see what happens. I want to talk
Speaker 3: more since working in the UK, I mentioned the Dubai thing,
Speaker 3: and I'm actually very fascinated by this. Not Dubai people
Speaker 3: moving to Dubai specifically per se, but the political economy
Speaker 3: generally of fiscal consolidation, which includes the possibility of leaving
Speaker 3: and when the issue that I think people would cite
Speaker 3: across UK and across Europe is probably twofold. One is
Speaker 3: declining productive capacity, manufacturing getting eaten by Chinese competition, and
Speaker 3: digital industry that can't keep up with what's happening in
Speaker 3: the United States, particularly with Ai. Okay, you say it's obvious,
Speaker 3: and many people say it's obvious. We all know that
Speaker 3: the government needs to shrink the deficit, but it's very
Speaker 3: tough if people can leave wealth. Taxes are very difficult,
Speaker 3: almost infamously so, and particularly in an era where the
Speaker 3: big money is being made through equity markets, not through
Speaker 3: traditional wage or labor income, et cetera. It'st I read
Speaker 3: to say. Obviously fiscal consolidation is the move, but even
Speaker 3: sitting aside electoral constraint, is there an obvious path towards
Speaker 3: reducing the deficit given the means through which the people
Speaker 3: with money can avoid paying tax.
Speaker 4: It is very difficult. And you mentioned the UK. The
Speaker 4: UK is a very specific problem in that so many
Speaker 4: young people after the pandemic have been signed off as
Speaker 4: permanently sick. They don't even have to look for work.
Speaker 4: So the welfare Bill has to a large extent gone
Speaker 4: out of control in the UK. And even though the
Speaker 4: labor governments here has an overwhelming majority, it couldn't get
Speaker 4: it through Parliament, couldn't get any reform measures through Parliament,
Speaker 4: and the markets, seeing that and the number of U
Speaker 4: turns they've had to do as their own MP's have rebelled, rebelling.
Speaker 4: I mean, it's very very difficult, and defense.
Speaker 3: Especially young people right because there's the heating assistance that
Speaker 3: the old people and the triple locks, so that the
Speaker 3: pension goes up by the maximum or the whatever the
Speaker 3: maximum of three different inflation measures are it's it's the old.
Speaker 3: It's the old as well.
Speaker 4: Right, yeah, no, absolutely, And this is one of the
Speaker 4: things which exacerbates into generational hostility tensions is that the
Speaker 4: younger people who can't get on the housing ladder see
Speaker 4: the older people protected through things like the triple lot
Speaker 4: pensions going up of wage inflation, price inflation or the
Speaker 4: minimum of two and a half percent, so on a
Speaker 4: real escalator and clearly totally unaffordable. However, when I look
Speaker 4: at the CBO and the US is just when I
Speaker 4: look at the CBO projections of US debt to GDP,
Speaker 4: they go off to infinity, and you know this is
Speaker 4: un sustainable because infinity is not a number which is sustainable.
Speaker 4: The IMF has looked at this quite close. The only
Speaker 4: other country to go off to infinity even quicker than
Speaker 4: the US is Strangely, China and the IMF have cited
Speaker 4: the US and China as the two basket cases. Now,
Speaker 4: the UK isn't the worst miscreant in terms of a
Speaker 4: stistical situation. France, I look at the IMF numbers. France
Speaker 4: is much worse, but it's under the protection of the
Speaker 4: euro Zone umbrella. The US is much worse, but it's
Speaker 4: under the protection of the dollar, being of the reserve currency.
Speaker 4: The bond vigilantes are woken up. They're pretty off looking
Speaker 4: around at what's going on. You know, they've got a
Speaker 4: dusty copy of rhine Art and Rogoff under their desks.
Speaker 4: They're thinking, you were getting here, We're going over one
Speaker 4: hundred percent of GDP. We're getting near the levels of
Speaker 4: where it's a problem. And to be fair on the
Speaker 4: public sector, what they've done is transfer a lot of
Speaker 4: the excess debt which was there in the household sector
Speaker 4: and corporate sector onto their own balance sheets. But you
Speaker 4: look at these and you think, well, well, actually, you
Speaker 4: look at the vigilantes are looking to pick someone off
Speaker 4: and give them a bloody good kicking, basically to teach
Speaker 4: everyone else. And the guild market is the weakest. Yeah,
Speaker 4: it hasn't got enough protection. It's the weakest kid in
Speaker 4: the playground and it's gonna get It's going to get
Speaker 4: beat badly beaten up at some points. And I think
Speaker 4: Bill grows. Bill grows many years ago, So the guilt
Speaker 4: market was sitting on a better, better kryptonite crypt nitro.
Speaker 4: And when you saw the oil price come down yesterday,
Speaker 4: but the guilt price, the guilt you're going up. That
Speaker 4: is a real that's a real issue, especially as Starmer
Speaker 4: Prime Minister Starmer exits the scene at some stage soon.
Speaker 2: That's right, we're recording this also during local elections, just
Speaker 2: to make sure the maximum amount of stuff possible could
Speaker 2: happen between when we record this and what it actually publishes.
Speaker 2: But actually, okay, you say the bond vigilantes have woken up,
Speaker 2: and one could infer from that statement that, like, we
Speaker 2: are now in a longer term period where bond yields
Speaker 2: are going to be higher and inflation is possibly going
Speaker 2: to be higher. But on the other hand, it feels
Speaker 2: like the news cycle is so compressed nowadays, and new
Speaker 2: stuff is happening all the time, and there's so much
Speaker 2: chaos in global politics. It also feels really difficult to
Speaker 2: have a sort of parademic is that a word pard
Speaker 2: You know, it's hard to have a longer term view
Speaker 2: on the market in the way that one could have
Speaker 2: an ice Age thesis in the early two thousands, is
Speaker 2: that possible for you now or are you sort of
Speaker 2: all moving in the short term like everyone else seems
Speaker 2: to be.
Speaker 4: I think it is possible, at least I'm trying to
Speaker 4: make it possible. But as you say, markets so volatile.
Speaker 4: I was reading that the recent rally in the equity
Speaker 4: mark ten percent plus rally, this was the fastest ever
Speaker 4: rebound ten percent rebound after a ten percent correction. And
Speaker 4: it's particularly on the equity market. They have become so
Speaker 4: fixated with the byThe on dips mantra that actually the
Speaker 4: freed of God are backs. There will never be recessions again.
Speaker 4: If there was a recession is because of the pandemic
Speaker 4: we can't actually remember two thousand and eight, which is
Speaker 4: a consequence of a very long period of growth building
Speaker 4: up excesses. No, I think there is a place for
Speaker 4: a long term theme, and the long term theme is
Speaker 4: actually it's fiscal continents, political weakness, and eventually the monetary
Speaker 4: authorities having to monetize away these debts. Because in the US,
Speaker 4: when you're paying four percent of GDP as government on
Speaker 4: your interest payments, that is absolutely I mean ten years ago,
Speaker 4: I was looking at the chart ten years ago, it
Speaker 4: was roughly the same as the Eurozone at around two percent.
Speaker 4: It's absolutely crazy numbers. So the endgame for me, I
Speaker 4: can remember twenty eight percent inflation in the UK and
Speaker 4: in the in the seventies. In the seventies, I certainly
Speaker 4: think we go back everywhere to double digit inflation.
Speaker 3: Because really the headlines to the episode.
Speaker 4: Yeah, no, I think fiscal dominance, which is there. The
Speaker 4: central bank beers will have no other option. I mean,
Speaker 4: you could get some consolidation on the crisis, but I
Speaker 4: think that's where we're heady. Just monetize away this. They'll
Speaker 4: cautured different lead.
Speaker 2: Sure, they won't say and now we are monetizing that.
Speaker 4: Yeah. Yeah.
Speaker 3: Do you ever do you ever talk to either new
Speaker 3: colleagues or clients for whom talking about two thousand and eight, Well,
Speaker 3: we talk about the nineteen thirties great depression, because this
Speaker 3: is like I feel like this is happening more and
Speaker 3: more in my life, something that I take for granted.
Speaker 3: Oh well, remember when Lehman and I might as well
Speaker 3: be talking about credit anstall or something like that.
Speaker 4: No, exactly, And with the retail participation in the mark
Speaker 4: and you get these one day options which I don't
Speaker 4: understand it's so short term, but having I mean, one
Speaker 4: of the advantages of being in finance since nineteen eighty
Speaker 4: two is I can remember the Asian crisis, which is
Speaker 4: one of the first times I got myself into deep trouble,
Speaker 4: being banned from Malaysia after writing that, are you still banned?
Speaker 4: I don't, I don't know. I don't feel for you.
Speaker 4: But what you and this relates to the AI theme,
Speaker 4: which we could do, is going in nineteen ninety six
Speaker 4: writing that the Asian miracle was basically a pack of
Speaker 4: cards waiting to collapse. And I had my bookshelf, this
Speaker 4: book from the World Bank, Thailand's Economic Miracle, Sustainable Growth
Speaker 4: and Development, And you just think I've seen me so
Speaker 4: many times before and going into the I remember going
Speaker 4: in the late nineties going around the US saying, look,
Speaker 4: this is a huge bubble which is going to collapse.
Speaker 4: It's very similar to the Asian crisis. I'm basically my boss,
Speaker 4: the chief economists, having to restrain the clients from punching
Speaker 4: my lights out. But when I read what I do
Speaker 4: now about the AI, et cetera, I just think, yeah,
Speaker 4: I've heard this so many times, and maybe that's maybe
Speaker 4: being young is better because you don't have that baggage.
Speaker 2: Well, being young, I think you're more of an optimism.
Speaker 4: So you've got a lot less gray hair and your
Speaker 4: beard than I have.
Speaker 3: Yeah, but more than I had a year ago. So
Speaker 3: I'm catching up these podcasts.
Speaker 4: Pick up color the cameras here a pretty good black,
Speaker 4: make a black white, make it black and wise.
Speaker 2: I can confirm though when we started this podcast, you
Speaker 2: did not have any gray hair, and it all sort
Speaker 2: of set in over the course of ten years.
Speaker 3: I noticed more.
Speaker 2: Since you mentioned AI and since we were talking about
Speaker 2: historic parallels, there seem to be a lot of similarities
Speaker 2: with the dot com bubble, just wild enthusiasm for a
Speaker 2: new technology and this expectation that everyone's going to be
Speaker 2: making money. On the other hand, the argument against dot
Speaker 2: com reducs is this idea that well tech companies have
Speaker 2: very very heavy valuations at the moment, but they are
Speaker 2: actually earning money, and if you look at the multiples,
Speaker 2: they are nowhere near where some of the dot com
Speaker 2: companies actually were. What's your thinking there? How much of
Speaker 2: a parallel or analogy is this?
Speaker 4: I mean, the main parallel I would draw is with
Speaker 4: the telecoms. Part of the ti SO dot com bubble
Speaker 4: was more TMT telecom media and technology. People forget it
Speaker 4: was a bit it was a bit wider. But the
Speaker 4: telecom side was quite similar to what you're seeing now
Speaker 4: with AI because they actually went out and dug trenches
Speaker 4: and laid cable. There was a Capex boom, and if
Speaker 4: you were selling cables in the same way you were
Speaker 4: selling in the video selling semiconductor chips, you benefited from
Speaker 4: producing picks and shovels for the goal rush. Essentially, there
Speaker 4: was real profits there on the telecom side at least.
Speaker 4: But the problem is the euphoria is the narrative is
Speaker 4: so compelling that you're given these companies are given free
Speaker 4: money essentially, although Oracle it's not quite so free anymore.
Speaker 4: But you're being given free money and you go off
Speaker 4: and spend it on it. You blow it on Capex,
Speaker 4: which isn't necessarily going to be profitable ten years down
Speaker 4: the road. And what you've got is basically when you
Speaker 4: look at the US I T megacaps, they've gone from
Speaker 4: being hugely free cash flow generative to zero I saw
Speaker 4: Chat twenty twenty seven. Zero. It's gone. It's being blown. Now.
Speaker 4: You might say well, they're at least they're not borrowing
Speaker 4: very heavily. But actually it's transforming their balance sheet. So
Speaker 4: I just read your quote. I brought a quote along here.
Speaker 4: I wrote it down so I didn't forget it. But
Speaker 4: it's it's about it could be about the AI transformation.
Speaker 4: So not so long ago, a leading experts O pine that,
Speaker 4: and I put this in mind, this sort of thing
Speaker 4: I write in my notes the opine that in retrospect,
Speaker 4: we will look back and recognize that the US economy
Speaker 4: was experiencing a once in a century acceleration of innovation
Speaker 4: which propelled forward productivity, output, corporate profits, and stock prices
Speaker 4: at a pace not seen in generations. If ever, now
Speaker 4: that absolutely applies to what is going on now. That's
Speaker 4: quote from Alan Green Span thirteenth of January two thousand
Speaker 4: at the New York Economic Club of New York just
Speaker 4: before now is that collapse? Now all that was true.
Speaker 4: And by the way, I was reminded of that quote
Speaker 4: reading Jeremy Grantham's book Making of a Perma Bear, Another
Speaker 4: Perma Bear. I went to his book launch. And I
Speaker 4: don't read many books. I'm quite lazy. I don't read
Speaker 4: many books. I thought as I was going to his
Speaker 4: book launch, I better read it. And he had some
Speaker 4: of these great quotes from Bananky and green Span, which
Speaker 4: they probably like to erase from people's memory, but that
Speaker 4: equally applies to now. It is absolutely transformational. It probably
Speaker 4: will be transformational. Doesn't mean you can't have a stock
Speaker 4: market collapse.
Speaker 2: Yeah, when bears have a book party, is it a picnic?
Speaker 3: Be it's a good one.
Speaker 1: Thank you.
Speaker 2: Sorry, I was trying to think of a Bear that
Speaker 2: was the best record.
Speaker 3: So many different directions we could go in. I want
Speaker 3: to ask you, there's something about the twenty tens that
Speaker 3: I've thought a lot about. You're talking about qi Qui
Speaker 3: ended in the mid twenty tens. Yeah, Now, I mean,
Speaker 3: first they stopped cutting rates. You know, it was a series,
Speaker 3: it was a sequence, right, But then they actually started
Speaker 3: shrinking the balanceyt it didn't affect stocks. Stocks just kept
Speaker 3: going up. And now we look today and again the
Speaker 3: stocks have at least in the US, but stocks are
Speaker 3: doing all very well. This is despite the fact that
Speaker 3: rates are the rate picture is nothing like it was
Speaker 3: in the beginnings of what you characterized as the ice age.
Speaker 3: Did that make your question anything? Have you revised any
Speaker 3: past views in light of the fact that it turns
Speaker 3: out evidently that ultra low rates and quantitative easing may
Speaker 3: not have been such a precondition for these incredible equity
Speaker 3: market games. How do you reconcile that?
Speaker 4: I think, well, certainly, back in the prior to the
Speaker 4: COVID recession, the quantity of easing for quite lengthy period.
Speaker 4: If you like got things going, got that momentum going,
Speaker 4: and one of the most profitable ways methods of investing
Speaker 4: is just momentum trasure. I sit near head of Quantity
Speaker 4: Andy Lapthorn, who I've worked with for thirty years. Last
Speaker 4: month he's actually trying to move a few desks away
Speaker 4: from me. But I know, looking at his quant work,
Speaker 4: momentum investing is absolutely fine. And actually, if I was participating,
Speaker 4: if I was fund manager fully invested, I'd be quite
Speaker 4: happily with that investment style. But looking at the technicals
Speaker 4: for when to get me out is the macro story changing?
Speaker 4: Is something changing. I've been writing recently that yes, profits
Speaker 4: are booming in the tech sector, but actually the second
Speaker 4: derivative is starting to turn over because you can't go
Speaker 4: parabolic forever. It's the second derivative is starting to turn over,
Speaker 4: so still very healthy profit zone. It started to slow
Speaker 4: and when you've got bubble conditions, then is this something
Speaker 4: the bulls should be looking at? Even if you're a bull,
Speaker 4: think well, actually that that is a change I should
Speaker 4: be watching. What I would say at the moment is
Speaker 4: I think when did earlier? I think the retail in particular,
Speaker 4: which certainly after the liberation trade bearmark came in early
Speaker 4: before the professional investors. They've been consistently the ones to
Speaker 4: drive the market back up. And it is a bit
Speaker 4: like what causes big bear markets are recessions. It's when
Speaker 4: and usually when you're at the peak of the cycle,
Speaker 4: you're on the wrong valuation, wrong forward pe, and prices
Speaker 4: collapse go. If you're a copper stock, normally at the
Speaker 4: peak of earnings, you're on you're p on four and
Speaker 4: so you're geared up for the collapse in prices. They
Speaker 4: have some memory there, but what tends to happen in
Speaker 4: bubbles you end up on a twenty three like the
Speaker 4: SMP on a twenty three times forward p at the
Speaker 4: point of recession. So you're the wrong earning forward earnings
Speaker 4: and the wrong pe, and there's no acknowledgment that there
Speaker 4: could be a recession out there, apart from the AIS
Speaker 4: spending on investment, which could collapse at any We've seen
Speaker 4: it before. Another deep seat comes along, something happens to
Speaker 4: blow that narrative up. But I had side of that.
Speaker 4: You look at the US economy and you look at
Speaker 4: the conception. Yeah, last year it's seen no employment growth
Speaker 4: when the economy is toddling along quite happily between two
Speaker 4: and three percent, and not just because of the public sector.
Speaker 4: Private payrolls ye're on year slowed to zero. You're thinking, yeah, yeah,
Speaker 4: it is having an effect here, has a positive effect
Speaker 4: on some ways on UNI labor costs, but this is
Speaker 4: really undermining consumption. So US real household incomes are up
Speaker 4: half a percent year on year, half a percent. The
Speaker 4: consumer spending in real terms is still up over two percent.
Speaker 4: Why is that the savings ratio in the US and
Speaker 4: the last year has collapsed from over five percent this
Speaker 4: time last year to three and a half percent. Now,
Speaker 4: that is as low as it. The only other times
Speaker 4: it's been lower is as people were spending the COVID checks,
Speaker 4: So it got down to two and a half percent
Speaker 4: or just before the two thousand and eight global financial crisis,
Speaker 4: when you had that credit bubble, the consumer is totally
Speaker 4: tapped out. And if you get a wave of inflation
Speaker 4: coming through the economy through cost push. Last time, companies
Speaker 4: just whacked up their margins that they put up their
Speaker 4: prices whacked up their margins as well, an unprecedented fashion
Speaker 4: because margins sort of contracted as costs went up, they didn't.
Speaker 4: It was absolutely unprecedented greedflation. And the saluis Fed named
Speaker 4: the sectors which did it, Retail, wholesale, and construction with
Speaker 4: the three big contributors to that whole economy level. But
Speaker 4: people had pandemic checks there, so companies could get away
Speaker 4: with doing it. Then this time around, this wave of
Speaker 4: cost push pressure comes through, our company's going to be
Speaker 4: able to get away with it When the savings ratio
Speaker 4: is already solo. Is it going to start squeezing the
Speaker 4: corporate sector margins which are ludicrously, obscenely inflated in my view.
Speaker 4: And when these margins start, if these margins start coming
Speaker 4: down because they can't pass on these price increases, will
Speaker 4: they then react to that by cutting jobs and cutting investments.
Speaker 4: So could the one surprise we get is actually the
Speaker 4: economy outside of AI investment is far weaker than we
Speaker 4: think and actually could tip over into recession. Now that
Speaker 4: could be a real surprise because that could take down
Speaker 4: the AI sector as well. It's not just an exogynous force.
Speaker 4: So I think that's an interesting that's an interesting black
Speaker 4: swan because no one is thinking this or price could
Speaker 4: cause a recession.
Speaker 2: One question I want to ask, given your long career,
Speaker 2: when were you most worried about the future. Is there
Speaker 2: a particular moment looking back where you were really hitting
Speaker 2: the panic button.
Speaker 4: I tend to stay very close to the panic button
Speaker 4: a bit two to close. Some people sir, that's your job.
Speaker 4: I tend to see problems around the corner. Actually instead.
Speaker 4: I was on a conference call with clients yesterday and
Speaker 4: I said, well, probably the most bearish thing I can
Speaker 4: think of from my side is I don't feel as
Speaker 4: bearish as I have done in the past. I struggled
Speaker 4: to see an immediate catalyst for collapse, and the positive
Speaker 4: narratives are always very compelling. I remember the time I
Speaker 4: was most worried globally was two and six, two thousand
Speaker 4: and seven, where it was obvious to me and I
Speaker 4: don't understand much about crypto and all these complicated things,
Speaker 4: or the details of air. But I actually got to
Speaker 4: the bottom of CDOs. And this was before the Big
Speaker 4: Show film where they made it a bit simpler. I
Speaker 4: actually understood CDOs. I went to a CDO conference in
Speaker 4: two thousand and two thousand and seven, and I was
Speaker 4: amazed that they weren't optimistic. They were getting really worried.
Speaker 4: And I just thought, as a macro person, when someone
Speaker 4: like Bananke says were asked about the housing bubble, I guess,
Speaker 4: I don't accept your premise there is a bubble, and
Speaker 4: there's never been a nationwide house price recession in history.
Speaker 4: I just say, you're an idiot. You should not be
Speaker 4: in your job. Basically, And yes, he was the right
Speaker 4: person at the time when the bubble burns. But if
Speaker 4: you looked at his because people said, well he did
Speaker 4: the thesis on the Great Depression, you looked at his
Speaker 4: thesis about the Great Depression, there was nothing about the
Speaker 4: credit bubble that preceded it at all. And similarly, he
Speaker 4: just did not understand the and where I'm not a
Speaker 4: big fan of central bankers or the banking improved dramatically
Speaker 4: after I left it the quality of the quality of
Speaker 4: the people there, because they just so reluctant to admit
Speaker 4: they're just constantly screwing it up and making it worse.
Speaker 4: For benevolent reasons. They're trying to make it better, but
Speaker 4: they make it a lot worse. And quantitive easing, i
Speaker 4: am my view, made it. They might have been an
Speaker 4: argument for doing the first quantitive easing, but just to
Speaker 4: keep on going poor Volka viscerated just before he died,
Speaker 4: a viscerated the fact by saying, you know you can't
Speaker 4: measure inflation that that closely it. You've got a two
Speaker 4: percent target for inflation. Anywhere between one to three is
Speaker 4: okay essentially as long as it's not accelerating off, and
Speaker 4: this is we're between one, broadly between one and three now.
Speaker 4: But he said we were getting down to one with
Speaker 4: measurement errors. It was ludicrous to try and push it
Speaker 4: back up to two percent. You didn't need to do that.
Speaker 4: And personally I just think central bad because needs to
Speaker 4: be rained quite closely.
Speaker 2: I do think in retrospect, when we look back to
Speaker 2: the sort of late twenty tens era of inflation, it
Speaker 2: felt pretty good, even though we were target and I have.
Speaker 3: A lot of thoughts the idea of undershooting and is
Speaker 3: never and I, I'm on record, is saying this not
Speaker 3: just in retrospect. I've never understood people whining about it
Speaker 3: too little inflation. So all right, seeds.
Speaker 2: Well, Albert, that was fantastic fun. Thank you so much
Speaker 2: for finally coming on, as.
Speaker 4: It's been a real pleasure. And I hope I.
Speaker 3: Have bears are fun. You're a pleasant guy.
Speaker 4: Well, people who read my stuff think I'm really miserable,
Speaker 4: but I'm actually a very happy And I went and
Speaker 4: I wear a nice shirt trying to cheer people up weirdly,
Speaker 4: but I haven't depressed too many of reviews.
Speaker 5: Yeah, I apologized, but I've got.
Speaker 4: Joe.
Speaker 2: That was really good fun. I'm glad we could finally
Speaker 2: have them on.
Speaker 3: We've been reading Albert really literally for decades or at
Speaker 3: least over a decade now really fun to finally.
Speaker 2: Really are fantastic.
Speaker 4: YEA.
Speaker 2: One thing that stood out to me, you know, I
Speaker 2: was thinking about what he was saying about the US
Speaker 2: savings rate and the ability of companies to push through
Speaker 2: price increases, and earlier this week I was reading the
Speaker 2: earnings transcript for Colgate and they were talking about packaging
Speaker 2: costs going up quite significantly because of higher petrochemicals prices,
Speaker 2: and also guiding their margin lower for the full year,
Speaker 2: so basically saying that they're going to absorb the costs.
Speaker 2: And there was one analyst on the transcript who was like, well,
Speaker 2: why don't you raise prices? And they basically didn't, you know,
Speaker 2: classic executive style. They didn't really say anything. They were
Speaker 2: just like, if I were you, I would incorporate the
Speaker 2: lower margin guidance into your algorithm. Leave it at that,
Speaker 2: but you know, like there might be something there totally.
Speaker 3: Can I just say this is going to be the
Speaker 3: type of thing that someone says at the very top
Speaker 3: and so forth. But before we flew to London, I
Speaker 3: downloaded Ray Curse Wilds The Singularity Is Near, a book
Speaker 3: about this is published in two thousand and four, in
Speaker 3: which he predicts that in the first half of this
Speaker 3: century we would have machines that are more intelligent than
Speaker 3: humans on almost every scale. But one of the things
Speaker 3: he says in the book part of his theory is
Speaker 3: that computers are going to keep getting better and better,
Speaker 3: and as they get better, more money will flow into
Speaker 3: computer investments because they can do more things, and they're
Speaker 3: War's law and all that. That actually the rate of acceleration,
Speaker 3: the derivative of the derivative can actually keep going up
Speaker 3: and up and up until you do get that vertical.
Speaker 3: And so now I'm thinking, like, we all know, the
Speaker 3: stock market would not be nearly where it was where
Speaker 3: it is right now if it weren't for AI obviously
Speaker 3: right might be in a bear market, might be in
Speaker 3: a recession.
Speaker 2: Yeah, the economy wouldn't be nothing.
Speaker 3: Like it is now. But now I'm like in that
Speaker 3: mood reading this so like, and Albert said, he's like,
Speaker 3: I feel a little weird right now because I don't
Speaker 3: know what the obvious bearish catalyst is. I'm in a
Speaker 3: little bit of a weird situation. And me I'm reading
Speaker 3: this book. It's like, what if, like earning is literally
Speaker 3: just go to infinity. Maybe it could happen, I don't know,
Speaker 3: but no.
Speaker 2: If Albert Edwards feels pretty good about stocks right now that.
Speaker 3: I'm talking about how earning should go to affinity, yeah,
Speaker 3: this is the side that maybe these are the types
Speaker 3: of episodes we record nearer the top.
Speaker 2: Okay, shall we leave it there? Yes, Okay, this has
Speaker 2: been another episode of the All Thoughts podcast. I'm Tracy Alloway.
Speaker 2: You can follow me at Tracy all the Way.
Speaker 3: And I'm Joe Wisnanhal you can follow me at The Stalwart.
Speaker 3: Follow our producers Carmen Rodriguez at Carman Arman, Dash, O
Speaker 3: Bennett at Dashbod Killbrooks at Killbrooks and Kevin Lozano at
Speaker 3: Kevin Lloyd Losano. And from our odd Loot's content. Go
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