Speaker 1: Already. Hello, I'm mare In Somerset Web and this hang on,
Speaker 1: this is Nearing Talks Money. Right, I take a bit
Speaker 1: of practice. Hello, I'm Maren Somerset Web and this is
Speaker 1: Marin Talks Money, the podcast in which people who know
Speaker 1: the markets explain the markets. Now, we're not really going
Speaker 1: to get into this until December, when we're going to
Speaker 1: start having a podcast every week talking to some of
Speaker 1: the most interesting people in the markets in fun, management
Speaker 1: and well and anything you can think of anything to
Speaker 1: do with money, we are going to talk about it.
Speaker 1: But today I have with me the person who I've
Speaker 1: probably talked to the most over the last twenty years,
Speaker 1: my good friend John Steppack, who writes the newsletter, the
Speaker 1: Bloomberg newsletter Money Distilled, which I'm sure you all already
Speaker 1: subscribe to, and if you don't, you need to go
Speaker 1: away and sign up to it right now because it
Speaker 1: is absolutely brilliant. John is a very clever man. Hello,
Speaker 1: John Hill, and I'd like to just subtly agson you
Speaker 1: just said thank you very much. Now, over the last fifteen, sixteen,
Speaker 1: seventeen years, John and I have been having conversations all
Speaker 1: over the place, and there are a couple of subjects
Speaker 1: that we always come back to and that I think
Speaker 1: we'll be covering on this podcast, which, by the way,
Speaker 1: don't get over excited. John is not going to appear
Speaker 1: every time, but it will be popping in and out
Speaker 1: of this podcast, so you'll get to know his voice
Speaker 1: pretty well. But the subjects that we have been talking
Speaker 1: about relentlessly and we will keep talking about over the
Speaker 1: coming years. We talk about house prices. We talk about
Speaker 1: UK equity markets, US secretary markets. We talk about bubbles.
Speaker 1: We love to talk about bubbles and booms and bust
Speaker 1: and we will talk about those a lot. Talk about
Speaker 1: how construct p folios. We talk about precious metals, We
Speaker 1: talk about the energy transition, We talk about fossil fuels.
Speaker 1: Were a little keener on fossil fuels and most people aren't.
Speaker 1: We um, So John, let's talk about what you've been
Speaker 1: writing about in Money Distilled recently. What's on your mind?
Speaker 1: I suppose the main thing is that there's been kind
Speaker 1: of two big things. So why is inflation? Obviously because
Speaker 1: the moment we're kind of going into that period where
Speaker 1: him thinking, okay, are we are we near the peak?
Speaker 1: Is that it? And then can we go back to
Speaker 1: the way that things were like three years ago, before
Speaker 1: all the acceptable currency blew up, and when house prices
Speaker 1: were still going up and acid places were still going up,
Speaker 1: and interest rates with at zero percent. And basically the
Speaker 1: answer is no, and I'm not sure that anyone's quite
Speaker 1: figured out that's no. This is for keeps. Ten percent
Speaker 1: inflation isn't gonna be permanent, but we're not going back
Speaker 1: to zero percent inflation either. So basically, inflation is both
Speaker 1: transient and structural. Right, That's the thing that we've been
Speaker 1: talking about for ages. We've been saying, you've got the
Speaker 1: transient element in there, but don't be fooled when it peaks,
Speaker 1: because there's a lot of dynamics in here that means
Speaker 1: that inflation at four or five percent is a long
Speaker 1: term dynamic. You're not coming to You're not come back
Speaker 1: to one. Not come back to Zra No actually really interested.
Speaker 1: So um A Chapel and Twitter who have followed Dario Perkins,
Speaker 1: who is it Tyes Lombard and he's very good, he's
Speaker 1: a smart guy. But he was reposted something from it.
Speaker 1: I don't know the guest as you should, but reposted
Speaker 1: this A couple of things that an e CV equanimis
Speaker 1: have done talking about UM. Basically, what they've done is
Speaker 1: they've done a counter factor looking at what would have
Speaker 1: happened if you joined nineteen seventies style monetary policy during
Speaker 1: the Great Moderation, which is the period when you know,
Speaker 1: basically inflation felt nothing and you know, we had this
Speaker 1: kind of boom period and it wouldn't made any difference,
Speaker 1: is what they found. And so their argument was, well,
Speaker 1: actually what's driven the Great Moderation were structural influences, which
Speaker 1: were fairly obvious, things like, you know, kind of the
Speaker 1: global labor market expanding to include China and China manufact
Speaker 1: on what's the cheap goods, and that's what can have
Speaker 1: suppressed prices for that length of time and the course
Speaker 1: we're going, and that reduced the power of labor. So
Speaker 1: we just stayed low for ages, you know, so that
Speaker 1: you can lay it pretty much at the door of
Speaker 1: China technology increasing that, demographics, et cetera, and that's it,
Speaker 1: and then we had this dynamic West central bankers believed
Speaker 1: that they did this, They did this, I mean the arrogance, right,
Speaker 1: arrogance that they did this, and then come the inflation.
Speaker 1: They believe that they can get rid of it, but
Speaker 1: of course they can't because all these structural things have
Speaker 1: turned around. Globalization has peaked, power is returning to labor.
Speaker 1: We just will start to rise globally. Yeah, which is
Speaker 1: which is good for for what girls, It's going to
Speaker 1: be a much harder time for I said winners and investors.
Speaker 1: Law um so, I mean, I guess that's one reason
Speaker 1: why we can spend a lot of time talking about
Speaker 1: it because then and I kind of decades of inflation
Speaker 1: volatility is giving a much tougher sort of environment in
Speaker 1: the last twenty years of actually inflation with altility, not
Speaker 1: just inflation sitting around at four inflation moving all over
Speaker 1: the place. Yeah, that's that's so much worse. Yeah, Like
Speaker 1: I like that as a as a coincept because it's
Speaker 1: last thing. I don't know if you've seen a bit
Speaker 1: again Deutsche Bank. That needs to be historical study. But
Speaker 1: as soon as inflation sent basically and I've seen other
Speaker 1: people talk about us as well. Was that idea that
Speaker 1: it's it's almost like you get a state change, so
Speaker 1: you know, like when you boil water, it's all it's
Speaker 1: just water, water, water, and then it's suddenly steam and
Speaker 1: suddenly all you know, the way acts changes totally. It's
Speaker 1: the same way the economy and inflation. So you know,
Speaker 1: up to about you know, mid single digits, it's kina predictable.
Speaker 1: But then once it goes above eight percent or another figure,
Speaker 1: then it starts to king of bounce around a lot
Speaker 1: over a prolonged period of time. And when once it's
Speaker 1: going to above that, it's never going back to as
Speaker 1: quickly to the sort of areas that markets have price
Speaker 1: and then just now, so it doesn't go back to
Speaker 1: two percent next year, you know, you're lucky if it
Speaker 1: goes back to kind of six percent. So I am
Speaker 1: so yeah. I mean, I think it's going to be
Speaker 1: a very very different kind of world from the one
Speaker 1: that actually the vast majority of us growing up in
Speaker 1: and invested through. But one of the things that we've
Speaker 1: talked about a lot of the years, and we'll try
Speaker 1: and get the wonderful Russell Napier, who's a brilliant strategist.
Speaker 1: We're trying to get him on the podcast, so every everyone,
Speaker 1: I love him. And one of the things that he
Speaker 1: talks about is how this is the dream for full
Speaker 1: governments anyway, to have inflation at four or five percent
Speaker 1: to everyone to feel okay with that, because once inflation
Speaker 1: is being temper cent, everyone's okay with four percent um.
Speaker 1: And if you can keep it at four or five
Speaker 1: percent and you can have negative real interest rates during
Speaker 1: that time, my nominal rates below four or five percent,
Speaker 1: then you can really work on getting rid of public
Speaker 1: debt and everything's going to be okay in a decade.
Speaker 1: Well yeah, and I mean that is in a weird
Speaker 1: and we that's the oup side, you know, because all
Speaker 1: this stuff a way, but it just you know, like
Speaker 1: the you know, the there's massive kind of like debt
Speaker 1: that's hanging off. That's the way that you get read
Speaker 1: all of it and a relatively painless kind of way.
Speaker 1: And of course the problem is it's not painless because
Speaker 1: somebody has to pay for it, and the people pe
Speaker 1: usually evils anyone with wealth at the moment, Yeah, exactly
Speaker 1: downside to financial opresson where we will cover that at
Speaker 1: length over the next couple of years. I think that's
Speaker 1: going to be a significant paign. Oh yeah. And also
Speaker 1: I've I've read something the other day about someone looking
Speaker 1: to target pension points and saying that everyone had a
Speaker 1: fine contribution schemes should be invested in these alternative energy
Speaker 1: schemes or infrastructure schames, and suddenly you're thinking about you know,
Speaker 1: that's classic financial depression where you're getting told we have
Speaker 1: this this pool of capital which is just stuck there.
Speaker 1: That's you know, has to go into these assets, whether
Speaker 1: or not what they deliver good re ton they won't write.
Speaker 1: Whenever you're forced to put your money into things by
Speaker 1: the government, you know what's going to happen next, because
Speaker 1: if it was attract of you wouldn't have to anytime
Speaker 1: you're coerced. It's not attractive in the first place. You know,
Speaker 1: a lot of that stuff is coming, Okay, so writing
Speaker 1: this newsletter that we're going to talk about a lot
Speaker 1: of over however many years to come, I hope what
Speaker 1: do people do? Ah, Now there's the question that's why
Speaker 1: masking you're not the other way around. The thing I've
Speaker 1: been writing about a lot recently, and I've been has
Speaker 1: been for a while, it is there is kind of
Speaker 1: UK equities um and obviously it's not the only thing
Speaker 1: that's interesting out there. But one thing I do like
Speaker 1: about the fact that, I mean the UK is cheap
Speaker 1: b it's been detested for so long that is hard
Speaker 1: to remember the last time it was popular. Um and
Speaker 1: also saying without this the other day, it reminds me
Speaker 1: of whenever we used to going about Japan before that
Speaker 1: you know, became appealing again. Don't tell people that go
Speaker 1: on about stuff I don't even know. That's so early
Speaker 1: on in the game. You know, whenever we we discussed
Speaker 1: a long term opportunities, which is what you should be
Speaker 1: looking for as investors. You shouldn't be looking for the
Speaker 1: short term stuff because you know where that leads. That
Speaker 1: leads you to f t X and panicing. How you
Speaker 1: can't get your money at your bank account anyway. That's
Speaker 1: just we will be talking about cryptocurrencies as well, but
Speaker 1: possibly not in a town that everyone will like, but UK.
Speaker 1: So it's nice to see the actually on our door step.
Speaker 1: That is stuff that is incredibly cheap and in any
Speaker 1: valuation measure you want to look at. And I mean
Speaker 1: a roll pale Duncan Lamoent from show does is always
Speaker 1: kind of like yeah we should dunk smart yeah, and
Speaker 1: and kind of underrated, I would say. So it's like,
Speaker 1: you know, he always kind of like puts out this
Speaker 1: study where he talks about the fact that it doesn't,
Speaker 1: you know, whatever sector you look at, even if you're
Speaker 1: comparing directly comparable companies, the UK ones are trading discount
Speaker 1: to the US ones, and often to European ones as well,
Speaker 1: even once you've taken out the tech sector stuff. Yes,
Speaker 1: so you're kind of like, well, why is that? And
Speaker 1: I mean no one n actually really seems to know.
Speaker 1: But the obvious answer seems to be the well, global
Speaker 1: capital has kind of shunned the UK, and it's probably
Speaker 1: showned it more since bregsit because you know, the it's
Speaker 1: easy to park it and the this is too hard
Speaker 1: to understand basket because the UK is ultimately quite a
Speaker 1: small chunk of the global equity market by market value.
Speaker 1: And also it's just been much easier to stick all
Speaker 1: your money in fine stocks for a long time, because
Speaker 1: then you've performed the global banks market. Anyway, that's all changing.
Speaker 1: Change needs have a little think, doesn't it, because of
Speaker 1: one thing we've learned over the last year that actually
Speaker 1: we knew already, didn't we It's that evaluations actually matter.
Speaker 1: They actually matter. You know, we were told during the
Speaker 1: Great Growth Bubble that didn't matter what you paid for
Speaker 1: a growth dock because the growth will out run the valuation.
Speaker 1: Everything would be fine. And we knew that wasn't true
Speaker 1: at the time, and it definitely isn't in global capital
Speaker 1: needs to have a good thing. But how it's time
Speaker 1: to start looking at valuations and paying the correct price
Speaker 1: because it's the price you pay that determines the return
Speaker 1: you make. Yeah, with themselves, go back and read the
Speaker 1: Warden Buffett absolutely or my favorite book, by the way,
Speaker 1: The Money Game, published in the sixties, uh pseudonym Adam Smith.
Speaker 1: Everyone should go get it. Absolutely brilliant. And the the
Speaker 1: chapter on growth stocks, which doesn't call growth stocks, you
Speaker 1: calls performance stocks, is I mean totally brilliant. Gives you
Speaker 1: a total roadmap for what happened during the last growth
Speaker 1: bubble that is just ending and reminds you of what
Speaker 1: may happen next because it's not over yet. This past
Speaker 1: performance stocks performance and Fidelity was the Baily Gifford of
Speaker 1: the day. Well, I mean the good news for Billy
Speaker 1: Gift for this Fidelity is still going stocks. That is true.
Speaker 1: See there's a silver lining for everybody. Right. Podcast listeners,
Speaker 1: thank you very much for listening to us talk about
Speaker 1: what we are going to talk about, and these are
Speaker 1: all things we will start talking about from December. John
Speaker 1: will be here relatively frequently and there will also be
Speaker 1: a very interesting, very very interesting guests on an almost
Speaker 1: weekly dasis um and we very much look forward to
Speaker 1: talking to you then, Jeff help the guest less potential
Speaker 1: guest less that it sounds really exciting. I'm looking forward
Speaker 1: to good Thanks John, Thanks Smith, Thank you so much
Speaker 1: for listening to this first introduction to Marin Talks Money.
Speaker 1: Please do be sure to subscribe to the podcast at
Speaker 1: your podcast provider of choice. H