WEBVTT - Yes It’s an AI Bubble. Here’s Why (with Albert Edwards) 0:00:02.720 --> 0:00:09.240 Bloomberg Audio Studios, podcasts, radio news. Hello Meren Talks Money. 0:00:09.240 --> 0:00:12.399 Listeners now, First, a quick reminder, we are recording an 0:00:12.400 --> 0:00:14.920 episode of Maren Talks Money in front of an audience 0:00:14.960 --> 0:00:18.040 the morning after Rachel Reeve's UK budget. That'll be a 0:00:18.040 --> 0:00:21.159 depressing affair. Join us at Bloomberg's European headquarters in the 0:00:21.200 --> 0:00:24.239 heart of the city of London for customs of smart analysis. 0:00:24.320 --> 0:00:27.720 I'll be joined by Helen Thomas of Blonde Money, Stephanie Flanders, 0:00:27.760 --> 0:00:30.760 Bloomberg's head of Government and Economics, and of course John 0:00:30.800 --> 0:00:33.479 Steppeck will be there. Find the registration link in the 0:00:33.520 --> 0:00:36.520 show notes. Space is limited as ever, so do sign 0:00:36.680 --> 0:00:52.400 up soon onwards. Welcome to Meren Talks Money, the podcast 0:00:52.440 --> 0:00:55.040 in which people who know the markets explain the markets. 0:00:55.120 --> 0:00:58.920 I am Maren Somerset Web. This week Albert Edwards, Global 0:00:58.920 --> 0:01:02.440 Strategistic Society in General, joined me in the London studio. 0:01:02.760 --> 0:01:07.160 The ft has called Albert a provocative and voluble strategist. 0:01:07.400 --> 0:01:11.120 Other people just call him famous investment guru, and my 0:01:11.120 --> 0:01:14.160 colleagues at Bloomberg like to call him a perma bear. 0:01:14.760 --> 0:01:19.000 Sorry about that, Albert, Albert. Welcome to Marin Talked Money. 0:01:19.480 --> 0:01:22.120 Hi there, and thanks for inviting me on. It's been 0:01:23.000 --> 0:01:25.120 a long while since I've been promising to come on, 0:01:25.560 --> 0:01:26.200 but here i am. 0:01:26.319 --> 0:01:28.080 You have been promising to come on, I would say 0:01:28.080 --> 0:01:30.600 for many many years, but here you are. This is 0:01:30.640 --> 0:01:32.560 exciting and I'm going to get as much audio as 0:01:32.600 --> 0:01:34.400 I possibly can because I suspect you and agree to 0:01:34.400 --> 0:01:36.240 come on again for another decade. So we're going to 0:01:36.319 --> 0:01:41.120 have to cover pretty much everything. So why don't we 0:01:41.600 --> 0:01:46.120 start with equity markets bubble or no bubble in the US. 0:01:46.160 --> 0:01:49.440 That is, I think there's a bubble, but they were 0:01:49.440 --> 0:01:52.280 going to always think there's a bubble. But I think 0:01:52.360 --> 0:01:55.800 looking back, I've been in the markets now since nineteen 0:01:55.920 --> 0:01:59.760 eighty two. I've been working, and these things come around 0:01:59.800 --> 0:02:04.400 from time to time, and during each bubble there's always 0:02:04.520 --> 0:02:09.600 very plausible narrative, very compelling, and hey, I know in 0:02:09.639 --> 0:02:12.160 previous bubbles like two thousand and seven and even that 0:02:12.200 --> 0:02:16.639 the Nasdaq bubble in late nineteen nineties, even I start 0:02:16.720 --> 0:02:20.880 to doubt myself. And this is one of these times, 0:02:21.120 --> 0:02:26.639 very compelling narrative, strong earnings, and but it will end 0:02:26.639 --> 0:02:28.520 in tears, that much, I'm sure of. 0:02:28.919 --> 0:02:31.320 We were both working back in the Dot gum bubble days, 0:02:32.000 --> 0:02:35.600 and so we remember the run up right those days 0:02:35.639 --> 0:02:38.040 when we were told that the old valuation methods didn't 0:02:38.080 --> 0:02:41.520 count anymore, and that we should realign ourselves with the 0:02:41.560 --> 0:02:45.400 new plateau of the market, etc. And that because the 0:02:45.639 --> 0:02:49.040 new technology was going to change the world so enormously, 0:02:49.440 --> 0:02:52.240 valuations didn't matter, current earnings didn't matter. It was all 0:02:52.240 --> 0:02:55.120 about the future. So we remember all those things, and 0:02:55.200 --> 0:02:58.040 then of course it all went horribly wrong. Do you 0:02:58.400 --> 0:03:01.040 feel any of those things now? 0:03:01.720 --> 0:03:07.320 I do, And the narrative is in some ways very similar, 0:03:07.520 --> 0:03:13.919 particularly when you see these extremely rich valuations in tech 0:03:14.080 --> 0:03:17.720 thirty times over thirty times forward earnings in the US 0:03:18.360 --> 0:03:22.960 being justified because of decent earnings growth. But one of 0:03:23.000 --> 0:03:26.400 the key comparisons I think is there when you think 0:03:26.520 --> 0:03:30.160 back to the late nineties the telecom sector, which will 0:03:30.200 --> 0:03:32.560 get it because it was it was it wasn't just technology, 0:03:32.840 --> 0:03:39.400 it was technology. MEDIAMTMTVOINT and the telecom sector were getting 0:03:39.440 --> 0:03:43.240 free money. They were laying cables. The amount of capital 0:03:43.280 --> 0:03:46.400 investment which was taking place on the back of the 0:03:46.440 --> 0:03:50.680 free money, a lot of it quite useful, but a 0:03:50.680 --> 0:03:53.120 lot of it replication, a lot of it not needed, 0:03:53.200 --> 0:03:57.600 wasted investment and how it strangled the other parts of 0:03:57.760 --> 0:04:02.880 the economy as money was towards this sector. So one 0:04:02.880 --> 0:04:05.640 of the key comparisons. You had a bubble in earnings 0:04:06.680 --> 0:04:10.000 as well as a bubble in valuations, and then something 0:04:10.080 --> 0:04:15.200 always changes to pull the rug out from under it. Now, 0:04:15.360 --> 0:04:18.279 during the Nasdaq bubble, it was higher interest rates. The 0:04:18.279 --> 0:04:20.640 Fed was raising interest rates through the back end of 0:04:20.720 --> 0:04:25.520 nineteen ninety nine. But one key thing which people often 0:04:25.680 --> 0:04:30.160 forget is despite these higher interest rates, as you moved 0:04:30.240 --> 0:04:32.880 right towards the end of nineteen ninety nine, people were 0:04:33.040 --> 0:04:36.960 so scared of the Y two K time bomb that 0:04:37.080 --> 0:04:39.480 we'd flip over to the first of January and all 0:04:39.480 --> 0:04:40.800 the computers will stopped working. 0:04:40.920 --> 0:04:44.400 Certing younger listeners won't remember this we're talking about. There 0:04:44.440 --> 0:04:49.000 was this palling fear that all of our technology, all 0:04:49.040 --> 0:04:52.360 of our computer systems would be unable to deal with 0:04:52.480 --> 0:04:55.640 this turn of the century and everything around us would collapse. 0:04:55.360 --> 0:04:58.559 Absolutely, And it was prudent to buy lots of tins 0:04:58.600 --> 0:05:03.239 of baked beans. If everything went down, then I personally 0:05:03.320 --> 0:05:05.479 quite likely you can cold baked beans out of a can. 0:05:06.000 --> 0:05:08.360 But if it didn't go down, it was fine. You 0:05:08.839 --> 0:05:11.960 had your cash safe. You just put it. It was just preventative. 0:05:12.320 --> 0:05:14.279 But what you saw, and you can see it in 0:05:14.320 --> 0:05:17.000 the I was chatting about it with one of my 0:05:17.120 --> 0:05:20.560 colleagues last week and I showed him a chart of 0:05:20.720 --> 0:05:24.440 USM not rocketing up towards the end of nineteen ninety 0:05:24.520 --> 0:05:28.240 nine and then collapsing as you flipped over into the 0:05:28.320 --> 0:05:31.159 year two thousand and everything didn't shut down. The FED 0:05:31.240 --> 0:05:36.120 withdrew that liquidity, and that is when the Nasdaq started 0:05:36.200 --> 0:05:39.400 toppling over. Now, as far as I can see, at 0:05:39.440 --> 0:05:44.080 the moment, those same conditions aren't there. The Fed is 0:05:44.240 --> 0:05:48.039 lowering interest rates rather than tightening interest rates, and they're 0:05:48.120 --> 0:05:51.159 just moving away from quantitative tightening to be neutral. I 0:05:51.160 --> 0:05:54.880 think they'll go to quantitative easing quite soon. So normally 0:05:54.920 --> 0:06:00.679 when bubbles burst, it is usually the monetary authorities tight cycle, 0:06:01.080 --> 0:06:04.680 and that isn't there. And I feel a bit like 0:06:05.360 --> 0:06:08.719 towards nineteen ninety nine, I just got bored being bearish, 0:06:09.640 --> 0:06:12.640 basically rattling my chain saying this is all a bubble, 0:06:12.680 --> 0:06:15.719 It's all going to collapse. I find myself talking about 0:06:15.720 --> 0:06:17.680 something else a lot a lot of the time, and 0:06:17.800 --> 0:06:23.520 that's the comparison, which really worries me. I can feel that, yeah, 0:06:23.560 --> 0:06:25.320 this is going to go on for a lot longer. 0:06:25.600 --> 0:06:27.840 And actually that's when something just comes out of the 0:06:27.880 --> 0:06:30.480 woodwork and takes the legs from out from under the bubble. 0:06:30.839 --> 0:06:33.839 Interesting. So, I mean, you are not the only person 0:06:33.839 --> 0:06:35.880 talking about a bubble, neither neither ofm I there's almost 0:06:35.920 --> 0:06:37.840 a bubble and people talking about bubbles, if you see 0:06:37.880 --> 0:06:40.359 what I mean said. It's not as though it's a 0:06:40.400 --> 0:06:45.359 contrarian thing to say anymore. It feels very obvious. But 0:06:45.600 --> 0:06:47.680 it also seems possible that they could be a melt 0:06:47.720 --> 0:06:50.080 up from here. Absolutely people talk about melt ups, and 0:06:50.120 --> 0:06:51.560 I'm like, kind of al really had a melt up 0:06:51.560 --> 0:06:53.240 that looked like a melt up. But maybe there's more 0:06:53.240 --> 0:06:53.840 melt up to. 0:06:53.760 --> 0:06:56.680 Come as they sort of start to flip away from 0:06:56.800 --> 0:07:00.240 quanstant tightening to quantitative easing. And I think it have 0:07:00.279 --> 0:07:03.479 to be. There's a lot of evidence that there's problems 0:07:03.520 --> 0:07:06.760 in the repo markets in the US and in the 0:07:06.760 --> 0:07:10.360 plumbing that the FED users that they're going to be 0:07:10.480 --> 0:07:14.960 forced to shift to quantitative easing quite quite soon, and 0:07:15.000 --> 0:07:19.480 that for example, could cause a further melt And so 0:07:19.560 --> 0:07:22.560 when the bubble burst will be even more damaging than 0:07:22.560 --> 0:07:24.119 it would be if you've got it over with early. 0:07:24.520 --> 0:07:27.160 And is this a bubble? Do you think that on 0:07:27.440 --> 0:07:31.600 bursting is similar in scale for dot com bubble or 0:07:31.680 --> 0:07:35.560 is it worse in that two To some extent, the 0:07:35.600 --> 0:07:40.040 TMT bubble was sort of contained, and this seems to 0:07:40.080 --> 0:07:44.200 have a much deeper set of deeper tentacles throughout the 0:07:44.320 --> 0:07:45.640 US economy in particular. 0:07:46.200 --> 0:07:50.560 I think what may make it worse this time around 0:07:51.360 --> 0:07:55.720 is that the New York Fed, for example, have shown 0:07:56.400 --> 0:08:01.480 that consumption growth has become more and more concentrated amongst 0:08:01.800 --> 0:08:07.640 higher earners, rich consumers whose wealth has been inflated by 0:08:07.640 --> 0:08:11.080 the stock market doing so well. Consumption for the for 0:08:11.200 --> 0:08:14.920 the bottom fifty percent of income earners has actually been 0:08:15.160 --> 0:08:19.040 quite quite poor. So to the extent, what has driven 0:08:19.080 --> 0:08:24.280 the economy forwards is AI investment, this sort of spaghetti 0:08:24.520 --> 0:08:28.160 of vendor and that's another comparison. There's spaghetti charts of 0:08:28.280 --> 0:08:32.640 vendor financing that we also saw in nineteen ninety nine. 0:08:33.360 --> 0:08:37.600 But what is is slightly more concerning is I think 0:08:37.640 --> 0:08:42.480 the economy may be more reliant on the stock market 0:08:42.559 --> 0:08:47.120 going up, and if it goes down thirty forty fifty percent, 0:08:47.200 --> 0:08:49.960 and we've seen these before. A lot of people be 0:08:50.120 --> 0:08:54.640 stunned that that can even occur, But actually consumption just 0:08:54.840 --> 0:08:57.240 gets hit very very bad. Indeed, so it's not just 0:08:57.280 --> 0:09:00.320 an investment cycle, but a consumption cycle too. 0:09:00.400 --> 0:09:03.880 Yeah, and that might be particularly bad given the huge 0:09:03.920 --> 0:09:07.679 retail participation in this bubble, particularly in the US right 0:09:07.840 --> 0:09:11.480 and I keep looking at the number of leveraged ETF launchers, 0:09:11.800 --> 0:09:14.800 single stock, single stock leverage ETFs. 0:09:14.480 --> 0:09:18.960 And certainly after Liberation Day when President Trump backed off 0:09:18.960 --> 0:09:24.040 his initial tariffs and the stock market started going back 0:09:24.280 --> 0:09:28.199 crazy from that point onward, that was retail which drove that. 0:09:28.360 --> 0:09:31.000 And the professional investors we could see from the service 0:09:31.040 --> 0:09:34.640 were very reluctant to participate. They were still quite bearish. 0:09:34.679 --> 0:09:38.160 They're expecting a recession, and they really drag kicking and 0:09:38.360 --> 0:09:42.360 screaming into the market by retail. Just yeah, just buy 0:09:42.400 --> 0:09:46.040 the dips, always just by, because you know, the stop 0:09:46.080 --> 0:09:49.000 market never goes down very might might pop down ten percent, 0:09:49.080 --> 0:09:53.080 fifteen percent, but it doesn't go down thirty forty fifty 0:09:53.080 --> 0:09:55.760 percent anymore until it won to bet until. 0:09:55.480 --> 0:09:59.120 It does exactly. Let's leave aside what might be a 0:09:59.200 --> 0:10:02.280 trigger for the end of the bubble for preventing a 0:10:02.320 --> 0:10:05.240 melt up. But a lot of this idea that it 0:10:05.320 --> 0:10:08.320 might go on, that might be a continuation in the 0:10:08.320 --> 0:10:11.640 bubble is about inflation and interest rates, right as you 0:10:11.720 --> 0:10:14.200 just said, so you're expecting the Fed to keep cutting rates, 0:10:14.200 --> 0:10:18.400 We're expecting ritcuts in the UK, etc. But you've also 0:10:18.480 --> 0:10:21.200 written about the deflationary environment in China. 0:10:21.559 --> 0:10:25.440 I mean, if any other economy G seven major G 0:10:25.559 --> 0:10:31.000 seven industrialist economy had seen the level of economy wide 0:10:31.160 --> 0:10:37.439 deflation that China is suffering. So China has seen twelve 0:10:37.640 --> 0:10:42.880 successive quarters, quarters, not months, quarters of year on year 0:10:43.000 --> 0:10:48.120 declines and its GDP deflator. That's economy wise, So it's 0:10:48.160 --> 0:10:51.680 more than just the CPI or RPI. It's economy. Why 0:10:51.720 --> 0:10:56.800 includes exports, includes investment goods, et cetera. If any other 0:10:56.840 --> 0:11:00.240 economy had seen that, they would be printing money like 0:11:00.320 --> 0:11:05.360 confetti and chucking it into the economy. China is in 0:11:05.400 --> 0:11:09.839 a real hole in terms of its deflation, and as 0:11:10.200 --> 0:11:13.840 we know having followed Japan over many years, the worst 0:11:14.600 --> 0:11:17.640 situation to be in is when you're a highly indebted 0:11:17.679 --> 0:11:22.240 economy as China is, and then to suffer deflation because 0:11:23.880 --> 0:11:25.120 it crushes you. 0:11:25.320 --> 0:11:27.920 Well, it increases the real value of people's debt and 0:11:27.960 --> 0:11:30.120 makes it even harder to pay off. You want infleation 0:11:30.200 --> 0:11:32.480 if you're in debt nor deflation, right absolutely. 0:11:32.520 --> 0:11:35.600 And Robin Brooks, who I follows at the Brookings Institute, 0:11:35.760 --> 0:11:39.120 no relation to the name, but he pointed out that 0:11:39.160 --> 0:11:44.920 the China's PPI on consumer durable goods is accelerating downwards. 0:11:44.920 --> 0:11:47.680 It's down four percent year on you own it's getting 0:11:47.720 --> 0:11:52.520 worse this and this is part of their surplus capacity problem. 0:11:53.040 --> 0:11:56.240 They've got a lot of deflation to give the world 0:11:57.240 --> 0:11:59.600 and they want to get rid of it. And the 0:11:59.640 --> 0:12:03.840 big surprise could be where, especially in the US, where 0:12:03.840 --> 0:12:07.600 everyone is waiting for inflation to pick up because of 0:12:07.640 --> 0:12:13.720 the tariffs, is it just doesn't that inflation we add 0:12:13.760 --> 0:12:18.440 a downside surprise in the UK recently, albeit from quite 0:12:18.520 --> 0:12:23.000 high rates, downside surprise in Japan. US has broadly been 0:12:23.040 --> 0:12:29.040 surprising on the downside looking at their underlying driver for inflation, 0:12:29.160 --> 0:12:32.360 which is unit labor costs. Is what I've been writing 0:12:32.440 --> 0:12:35.800 is look unit labor costs, and unit costs are only 0:12:35.840 --> 0:12:38.319 at running at one percent year on year, and that's 0:12:38.520 --> 0:12:42.280 that's not an erratic number, that's smooth that's what most 0:12:42.320 --> 0:12:47.359 economists think drives inflation, and that's been coming down quite smartly, 0:12:48.040 --> 0:12:53.360 as has Court company inflate corporates. The corporate price deflator 0:12:53.400 --> 0:12:56.800 has come down, and that's running quite a way below 0:12:57.480 --> 0:13:02.240 course CPI and I think the surprise maybe not the 0:13:02.280 --> 0:13:05.160 economy suddenly drops into the recession in the next few months, 0:13:05.360 --> 0:13:09.480 but inflation really carries on under shooting, the bond rally 0:13:09.679 --> 0:13:12.600 really gets going, which will cheer Rachel Reaves up up 0:13:12.640 --> 0:13:16.440 no end in the UK, and actually that inflates the 0:13:16.440 --> 0:13:18.760 stock market bubble even more. 0:13:18.600 --> 0:13:22.880 Perhaps, but it's not idea for deeply indebted Western economies. 0:13:22.960 --> 0:13:24.480 If one of the things that we talk about a 0:13:24.480 --> 0:13:26.040 lot on the podcast is how do you deal with 0:13:26.040 --> 0:13:28.080 this level of public debt? What on earth can you 0:13:28.120 --> 0:13:30.120 do about this? And the answer, of course is a 0:13:30.120 --> 0:13:34.120 type of financial repression, running interest rate slightly lower than 0:13:34.160 --> 0:13:36.480 inflation for a long time, so that eventually your debt 0:13:36.880 --> 0:13:39.720 doesn't necessarily go way, but it is massively reduced to 0:13:39.760 --> 0:13:42.760 that in some ways. The last thing that an economy 0:13:42.840 --> 0:13:45.320 like ours once right now is another wave of deflation 0:13:45.400 --> 0:13:46.000 out of China. 0:13:46.520 --> 0:13:48.920 It's to get out of jail free card for the 0:13:49.280 --> 0:13:53.840 politicians cyclically, I could think we can get down shift 0:13:53.840 --> 0:13:58.160 in inflation on a secular or trend basis. I mean, 0:13:58.200 --> 0:14:01.360 I'd been known for many many years my ice age thesis, 0:14:01.400 --> 0:14:03.520 which I put together at the end of the nineties 0:14:03.800 --> 0:14:07.960 the West, following what happened in Japan, that inflation would 0:14:07.960 --> 0:14:11.160 come low and low and bond yours following that after 0:14:11.160 --> 0:14:15.400 the pandemic, I have switched camp into a secular rise 0:14:15.440 --> 0:14:18.880 in inflation. I can remember personally twenty eight percent inflation 0:14:19.000 --> 0:14:21.320 in the UK and actually in Japan also a twenty 0:14:21.320 --> 0:14:25.360 eight percent inflation. I think seeing the fiscal on a 0:14:25.480 --> 0:14:30.600 secular basis, seeing the fiscal incontinence which is there and 0:14:30.640 --> 0:14:37.520 the fiscal dominance over monetary policy, I can see inflation 0:14:37.840 --> 0:14:41.080 trending back up to double digits. Might be you might 0:14:41.120 --> 0:14:46.280 get some short term relief, but actually politicians seemed congenitally 0:14:46.680 --> 0:14:51.320 unable to get to deal with this, these fiscal deficits, 0:14:51.360 --> 0:14:54.960 which means the path of these resistance will ultimately be 0:14:55.000 --> 0:14:55.720 money printing. 0:14:55.840 --> 0:14:59.400 So we might get some short medium term relief from 0:14:59.520 --> 0:15:03.800 the Chinese situation, but medium to longer term we have 0:15:03.880 --> 0:15:06.640 to expect our inflation because there is no other thing 0:15:06.680 --> 0:15:09.000 that can happen without politicians getting a grip, which are 0:15:09.040 --> 0:15:09.560 quite clearly not. 0:15:09.560 --> 0:15:13.440 Going to I mean and popularism. Anyone in the UK suggests, 0:15:13.440 --> 0:15:15.480 for example, who we get rid of the triple lock 0:15:15.560 --> 0:15:20.360 on pensions will be voted out of office immediately. Perhaps 0:15:20.400 --> 0:15:21.960 best not to say it in the run up to 0:15:22.000 --> 0:15:22.480 the election. 0:15:22.800 --> 0:15:24.920 We're speaking on the day that Rachel Reeves has been 0:15:25.000 --> 0:15:29.200 out talking this morning about well about the budget, which 0:15:29.240 --> 0:15:32.120 is increasingly weird that you come out three weeks before 0:15:32.120 --> 0:15:34.040 a budget to tell everyone there's going to be bad 0:15:34.040 --> 0:15:36.000 and using the budget to make them feel really miserable 0:15:36.000 --> 0:15:37.440 in the advance of the budget and make things even 0:15:37.480 --> 0:15:39.800 worse than they were already. But here we are. That's 0:15:39.840 --> 0:15:42.440 what she's done. And she's made it pretty clear that 0:15:42.480 --> 0:15:45.200 this isn't about spending cards, it's not about getting group 0:15:45.360 --> 0:15:49.400 on public spending. It is about taxing everybody more. No 0:15:49.440 --> 0:15:52.920 longer about broad shoulders. It's about kind of everybody's shoulders. 0:15:52.600 --> 0:15:56.800 Yes, and getting hold of the spending, particularly welfare spending 0:15:56.840 --> 0:16:00.280 and disablit And we saw even with an I think 0:16:00.320 --> 0:16:03.400 global bomb, markets took a big lesson from this. The 0:16:03.480 --> 0:16:06.320 Labor Party, even with one hundred and eighty plus majority 0:16:06.400 --> 0:16:10.000 couldn't get through the most minor of reforms in terms 0:16:10.000 --> 0:16:14.440 of in terms of disability spending where alone in the world, 0:16:14.960 --> 0:16:20.760 particularly for under thirties. It has exploded upwards as people 0:16:20.960 --> 0:16:24.040 get signed off, get signed off and their TikTokers to 0:16:24.080 --> 0:16:26.520 actually explain to you how to gain the system to 0:16:26.600 --> 0:16:31.120 do this, and they're just unable, totally unable to get 0:16:31.160 --> 0:16:34.880 a grip on it. And it's although the UK isn't 0:16:34.920 --> 0:16:37.600 the worst offender by any means, I think the US 0:16:37.720 --> 0:16:41.160 is worse. I think France is worse. Both those countries 0:16:41.200 --> 0:16:44.000 are more protected than the UK. France because it's wrapped 0:16:44.080 --> 0:16:47.400 up in the Eurozone, wrapper US because of the dollar 0:16:47.480 --> 0:16:51.120 and the exorbitant privilege of being able to borrow in 0:16:51.160 --> 0:16:56.240 the dollar. But the UK is far more vulnerable to 0:16:57.080 --> 0:16:59.600 blow up. I mean, luckily, we're in a period where 0:16:59.640 --> 0:17:02.480 bondi are coming down, and this is what blew up 0:17:02.520 --> 0:17:05.520 Liz Trusts. Her budget came at a time when bond 0:17:05.600 --> 0:17:09.600 yours were rising sharply globally, and it wasn't a good 0:17:09.680 --> 0:17:12.400 time to hit the markets with that sort And. 0:17:12.359 --> 0:17:14.400 Also she hadn't put any effort into getting everyone else 0:17:14.440 --> 0:17:17.719 on side because it came out of nowhere exactly. But 0:17:17.760 --> 0:17:20.080 so we have this massive public debt problem and as 0:17:20.119 --> 0:17:23.560 you say, this sort of fiscal fiscal dominance in the UK, 0:17:23.680 --> 0:17:27.439 and does where is it concern about that that the 0:17:27.440 --> 0:17:28.720 gold price has been signaling. 0:17:29.760 --> 0:17:32.040 I think it is. I think people are joining the 0:17:32.080 --> 0:17:36.680 dots and I think the debasement trades. And because it's 0:17:36.720 --> 0:17:41.320 not just gold. Until the recent correct it's had a 0:17:41.400 --> 0:17:44.639 very deep well is enjoying a very deep enjoying not 0:17:44.720 --> 0:17:47.320 quite the word right word, if you're holding it, it's 0:17:47.600 --> 0:17:51.280 seeing a very deep correction at the moment. But it's 0:17:51.320 --> 0:17:54.920 not just gold, it's the entire precious metal complex which 0:17:55.040 --> 0:18:00.239 ran up very, very sharply. Incidentally, from the day of 0:18:00.400 --> 0:18:05.280 August the twenty seconds Jerome Powell, the Fed chairs Jackson 0:18:05.359 --> 0:18:11.159 Hole's speech, gold ran up thirty percent, but actually the 0:18:11.240 --> 0:18:15.440 rest of the precire's metal complex rose even more strongly. 0:18:15.840 --> 0:18:18.919 Now you got to the stage where gold had was 0:18:19.119 --> 0:18:26.000 so overbought. Technicians look at things like calls relative strength 0:18:26.040 --> 0:18:29.440 index are RSIs. They're called how far the price has 0:18:29.600 --> 0:18:34.200 moved from the moving average. Essentially had a monthly RSI 0:18:34.440 --> 0:18:39.040 of over ninety two, which was the highest in history 0:18:39.160 --> 0:18:41.080 for the goal market. So you're going to see a 0:18:41.200 --> 0:18:45.119 very deep correction. But I think it was this is 0:18:45.160 --> 0:18:48.560 the deed's basement trade. Why aren't bonds he was also 0:18:48.680 --> 0:18:52.359 rising at the same time sharply at that time. I 0:18:52.359 --> 0:18:54.800 think it's basically because people say, well, it's not a 0:18:54.840 --> 0:18:59.600 deed basement trade, because bond If people expected very high inflation, 0:18:59.680 --> 0:19:00.399 bond bond. 0:19:00.280 --> 0:19:02.360 Market collapse and yields will be going to the sky. 0:19:02.840 --> 0:19:07.399 And it's because people figure out because of fiscal dominance, 0:19:07.680 --> 0:19:12.760 the central banks will be told to intervene to hold 0:19:12.760 --> 0:19:15.280 down bond yields at some point, whether it's five percent, 0:19:15.320 --> 0:19:17.359 whether it's five and a half percent or six percent, 0:19:17.560 --> 0:19:20.560 at some point, the maths just do not add up 0:19:21.320 --> 0:19:24.919 anymore for fiscal sustainability, so they would have to be 0:19:25.960 --> 0:19:29.480 yell curve control or as Japan had for many years, 0:19:29.520 --> 0:19:32.879 yell curve control or quantitive easing, which is effectively yield 0:19:32.920 --> 0:19:37.639 curve control. So, yeah, the precious metals can rip raw upwards, 0:19:37.680 --> 0:19:40.640 but the bond yields don't in the same way. They 0:19:40.680 --> 0:19:43.760 get that they start to stall out as they get 0:19:43.800 --> 0:19:44.600 to higher levels. 0:19:44.640 --> 0:19:46.639 So you think gold will come back. I find that 0:19:47.000 --> 0:19:49.160 just down to four thousand today as we speak where 0:19:49.520 --> 0:19:53.320 three nine hundred and sixty seven dollars. But it seems 0:19:53.640 --> 0:19:56.920 likely to me and to John who's on the podcast 0:19:56.920 --> 0:19:58.879 with me, a lot that gold will go back in 0:19:59.000 --> 0:20:00.600 four thousand and its still some things on. 0:20:01.160 --> 0:20:07.400 Silver, gold, silver, platinum, palladium, all of them go gold. 0:20:07.480 --> 0:20:09.120 Might be goal, might be the. 0:20:09.119 --> 0:20:11.120 Laggard gold miners. 0:20:11.760 --> 0:20:17.600 Yeah, gd x gd x J. I don't personally recommend stop. 0:20:17.880 --> 0:20:20.600 I wouldn't know. I'm a macro person. I wouldn't know 0:20:20.760 --> 0:20:24.320 stock if it bits me. I just waved my arms 0:20:24.359 --> 0:20:28.120 around and talk about the macro backdrop. And actually there 0:20:28.160 --> 0:20:32.120 was quote my former colleague Dylan Grice, you know very well, 0:20:32.880 --> 0:20:36.399 used to do a lot of research about the what 0:20:36.480 --> 0:20:40.240 happened to Germany in the nineteen twenties, Yes, and why 0:20:40.320 --> 0:20:44.439 Rudolph Vona Havistein, who was the Rikbang governor, why he 0:20:44.720 --> 0:20:50.440 kept on printing money. And the conclusion was, and I 0:20:50.480 --> 0:20:53.440 think it was a quote in later life, was he 0:20:53.520 --> 0:20:57.719 basically kept on because he was scared of the economic 0:20:57.760 --> 0:21:02.720 and social consequences of stopping. And it's similar with the 0:21:02.760 --> 0:21:08.560 public sector deficits. The politicians are scared of the social 0:21:08.800 --> 0:21:14.800 consequences of stopping spending money to and throwing money out 0:21:14.840 --> 0:21:20.000 as they are are doing these huge, huge spending plans 0:21:20.040 --> 0:21:23.959 they've they've got and so the path of least resistance 0:21:24.520 --> 0:21:25.600 is money printing. 0:21:25.600 --> 0:21:27.480 They can just keep it going for a few years 0:21:27.480 --> 0:21:28.400 another few years. 0:21:30.920 --> 0:21:34.560 Later the COVID period it didn't if you like, spoiled 0:21:34.680 --> 0:21:40.879 politicians into thinking they could spend like this, and eventually 0:21:40.920 --> 0:21:43.720 the markets come forth for them. They look around for 0:21:43.800 --> 0:21:46.360 the weak as Canada that may well be the UK 0:21:46.480 --> 0:21:50.440 at some stage, even though other countries are worse. They'll 0:21:50.520 --> 0:21:54.560 pick off the weak as Canada and basically bludgeon them 0:21:54.840 --> 0:21:58.920 and make an example of them. But that that's which 0:21:58.920 --> 0:22:01.680 is why we're going to end up up with QUANSITIV 0:22:01.920 --> 0:22:06.360 unlimited money printing to hold down and if the central 0:22:06.400 --> 0:22:09.399 banks won't do it. I was like the Groud char 0:22:09.520 --> 0:22:13.239 Marks quote, these are my principles. If you don't like, 0:22:13.480 --> 0:22:16.240 don't like them, I have others. These might be my 0:22:16.320 --> 0:22:18.840 central bankers today. If they don't do what I say, 0:22:18.960 --> 0:22:20.080 I'll find others to do it. 0:22:20.240 --> 0:22:22.679 Yeah. So central bank independence, as ever is something of 0:22:22.680 --> 0:22:39.919 a myth, is absolutely real. Yeah. Now, on the subject 0:22:40.000 --> 0:22:42.199 of central bankers, what part do you think that central 0:22:42.200 --> 0:22:44.879 bank buying of gold is playing in this. So we've seen, 0:22:45.119 --> 0:22:47.639 you know, various central banks around the world, Channel in particular, 0:22:48.040 --> 0:22:49.960 constantly adding to their gold holdings. 0:22:50.320 --> 0:22:54.320 I think this is a natural consequence from the pivot 0:22:54.440 --> 0:23:01.719 away from US assets, which was people tell me, and 0:23:01.760 --> 0:23:05.000 I think it's a reasonable hy partly a consequence of 0:23:05.040 --> 0:23:09.760 the seizure of Russian assets after the invasion of Ukraine. 0:23:10.400 --> 0:23:13.800 I was reading a narrative of the cabinet meeting in 0:23:14.240 --> 0:23:18.480 the US where everyone was talking about seizing or freezing 0:23:18.520 --> 0:23:23.280 their assets, and Janet Yellen did demure about shouldn't we 0:23:23.480 --> 0:23:28.720 think through the economic and financial consequences of this? But 0:23:28.800 --> 0:23:35.240 it certainly weakens Yeah, which emerging market central bank, which 0:23:35.359 --> 0:23:40.639 might fall foul of the US at some stage is 0:23:40.680 --> 0:23:43.480 going to buy US assets and deposit them in the 0:23:43.560 --> 0:23:46.480 US to be seized later on. And I think that's 0:23:46.680 --> 0:23:49.040 partly what is going on here. And you can you 0:23:49.040 --> 0:23:50.719 can see it from a lot of a lot of 0:23:51.440 --> 0:23:55.760 the hermegany of the dollar has been weakened somewhat. I 0:23:55.760 --> 0:23:57.879 don't think people who say that the age of the 0:23:57.880 --> 0:24:00.560 dollar is over I think a premature, but that I 0:24:00.600 --> 0:24:02.840 think part of it is that is what is going 0:24:02.920 --> 0:24:04.960 on and it's perfectly logical. 0:24:05.880 --> 0:24:09.640 Doesn't make sense under their circumstances to also hold some 0:24:10.480 --> 0:24:14.760 cryptocurrency us to hold bitcoin in particular, do you think to. 0:24:14.600 --> 0:24:22.000 The extent that crypto is a bet against central bank competence? 0:24:22.040 --> 0:24:24.760 Which is what my former colleague Dylan Greis always used 0:24:24.800 --> 0:24:28.560 to tell me, is I would add it to a portfolio, 0:24:29.359 --> 0:24:34.520 but with a very skeptical and cynical view about it, 0:24:34.640 --> 0:24:37.080