WEBVTT - The Barry Norris Aftershow

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<v Speaker 1>Welcome to Maren Talk's Money the After Show. This is

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<v Speaker 1>where we unpack all the commentary here in our regular podcast.

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<v Speaker 1>I'm Maren Sunset Web. This week, John Steppeck, senior reporter

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<v Speaker 1>at Bloomberg and offered the daily Money to Silve newsletter,

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<v Speaker 1>which if you haven't subscribed to you by now, you

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<v Speaker 1>must subscribe to. Joins me to discuss my conversation with

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<v Speaker 1>Barry Norris, founder, CEO and CIO of Argonaut. John, what

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<v Speaker 1>did you think?

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<v Speaker 2>I thought it was great, Well.

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<v Speaker 1>That'll do silence now.

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<v Speaker 2>John thought it was great. World done the nice thing.

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<v Speaker 2>But buddy is he is very street and obviously that's

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<v Speaker 2>one thing that people in his bottled the can of

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<v Speaker 2>edge find long short world, do you tend to be

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<v Speaker 2>a bit more four to R eight and the spoken

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<v Speaker 2>than your average point manager. But it's just good to

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<v Speaker 2>hear someone taking in and trying to make some sense

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<v Speaker 2>of particularly the whole kind of like renewable sector and

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<v Speaker 2>basically stating the common sense reality, but then backing it

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<v Speaker 2>up with numbers as well.

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<v Speaker 1>One of those sectors, isn't it where there's an awful

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<v Speaker 1>lot of hope over reality and that we would all

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<v Speaker 1>absolutely love it who would not love it if when

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<v Speaker 1>was the answer to everything, and if wind energy was

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<v Speaker 1>cheap and it could answer all our prayers and get

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<v Speaker 1>us through the energy transition with no problem. Because so

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<v Speaker 1>many people want that, they find it quite hard to

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<v Speaker 1>accept that it might not actually be true.

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<v Speaker 2>Yeah, there's also an idea obviously political side to it

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<v Speaker 2>as well, which makes it hard to have a reasonable

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<v Speaker 2>conversation about it because you're deemed to be talking something

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<v Speaker 2>down if you point out issues about it.

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<v Speaker 1>I going to say, you're immediately treated as though you know,

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<v Speaker 1>you don't want to energy transition, or as there in

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<v Speaker 1>the pocket of big oil if you criticize big wind.

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<v Speaker 2>Yeah, exactly what Barry was saying about wind energy is

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<v Speaker 2>proven like even as we speak to be absolutely correct,

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<v Speaker 2>because you know, for example, like he was talking about

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<v Speaker 2>Orsted and obviously it's had some issues. But also I

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<v Speaker 2>was reading a piece on the Bloomberg Terminal about how

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<v Speaker 2>Semen's Energy has basically had to get a big credit

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<v Speaker 2>line that's partly backstopped by the German government in order

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<v Speaker 2>to fund fixing it's win turbinds. And it's because it's

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<v Speaker 2>found that there's basically lots of potential flaws or actual

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<v Speaker 2>flaws with wind turbines, they need to be sorted out,

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<v Speaker 2>and that would have, you know, basically just cost an

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<v Speaker 2>intermountable amount of money for the company to do if

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<v Speaker 2>it wasn't being subsidized by the government. And people will

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<v Speaker 2>talk about subsidies for fossil fuels and all the rest

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<v Speaker 2>of it. But I think Barrie's getting to the point

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<v Speaker 2>that we're substituting a kind of superior for the energy

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<v Speaker 2>for an inferior form. At least that's what we're trying

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<v Speaker 2>to do, and that is going to go badly.

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<v Speaker 3>The problem we've got at the moment if we've got

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<v Speaker 3>an energy transition where all the products are inferior, so

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<v Speaker 3>evs are inforior to eternal combustion. I know someone will

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<v Speaker 3>tell me they like driving their electric car for five

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<v Speaker 3>miles a day, but evs or are inferior products. Heat

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<v Speaker 3>pumps are inferior products. Wind is an inferior product. So

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<v Speaker 3>in order to get people to use inferior products, you

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<v Speaker 3>require governments to get involved through subsidies, through banning all

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<v Speaker 3>the other more useful products, and you require zero interest

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<v Speaker 3>rates in order for all of these projects to be

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<v Speaker 3>stacked up with zero cost debt in order for equity

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<v Speaker 3>of vesters to make a return.

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<v Speaker 2>And I also think that what it's amazing that this

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<v Speaker 2>isn't talk apit very much. But we keep going on

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<v Speaker 2>a bit of difference between the America and the ist

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<v Speaker 2>of the world in terms of economic performance, and hardly

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<v Speaker 2>anyone or no one ever leads on the fact that

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<v Speaker 2>less than twenty years ago America basically discovered that it

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<v Speaker 2>was sitting there in Saudi Arabia. You know, they had

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<v Speaker 2>like tons of oil and gas that they previously couldn't

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<v Speaker 2>access that they were suddenly able to access. And we

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<v Speaker 2>can of all throw our hands up and say, oh,

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<v Speaker 2>I wonder what America's got going for it? Is it

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<v Speaker 2>because they're more capitalists?

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<v Speaker 3>Well?

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<v Speaker 2>Probably? Is it because they dealt with their banks better

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<v Speaker 2>after two thousand and eight? Yes? Is it anything to

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<v Speaker 2>do with the fact that they're sitting on an absolutely

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<v Speaker 2>massive pile of fossil fuels that are not afraid to use?

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<v Speaker 2>Oh no, surely not. That can't be any to do

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<v Speaker 2>with it. This is not a topic of conversation that

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<v Speaker 2>anyone discusses in adult terms anymore.

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<v Speaker 1>It's interesting, isn't it? Because There's one thing we know

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<v Speaker 1>that history tells us is that all great, all great

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<v Speaker 1>leaps forward are made in times of plentiful, cheap dense energy.

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<v Speaker 1>And if we purposefully move away from that cheap dnse energy,

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<v Speaker 1>which we may have to do, do have to do,

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<v Speaker 1>things change. And we can't deny that making energy expensive

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<v Speaker 1>makes a difference to the way that.

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<v Speaker 2>We grow up exactly. But I mean, to be fair,

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<v Speaker 2>the other things we do also have an alternative and

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<v Speaker 2>is nuclear power. And obviously investors have cott and doointed that.

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<v Speaker 2>And we're having one of the sickly coal excitement moments

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<v Speaker 2>for danium. I think the Camico is finally back at

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<v Speaker 2>whatever price it was whenever in twenty eleven when the

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<v Speaker 2>Fukushima disaster put paid to the last kind of like

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<v Speaker 2>nuclear excitability face. But again that's because that's kind of

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<v Speaker 2>not in the same realm as the kind of inverted

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<v Speaker 2>commas green stuff. Nobody talks about that seriously either, So

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<v Speaker 2>we really are kind of shooting ourselves in the foot

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<v Speaker 2>over a extra and magical thinking in politics and semantics

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<v Speaker 2>is really a big mistake.

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<v Speaker 1>So one of the interesting things about everything that Barry

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<v Speaker 1>said podcast that we did with them is that only

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<v Speaker 1>a couple of days later, we're seeing evidence all over

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<v Speaker 1>the place, not just the Semens thing, but elsewhere that

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<v Speaker 1>he's absolutely right. So as we talked in our introduction

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<v Speaker 1>briefly about this business of the government changing the maximum

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<v Speaker 1>price that can offer in CFD contracts, which is a

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<v Speaker 1>direct result of there being no bids for the projects

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<v Speaker 1>at the last government auction, which was a bit of

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<v Speaker 1>a blow for the UK, and they're renewable power strategy,

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<v Speaker 1>so obviously they've had to have a change, and the

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<v Speaker 1>government has pushed this through saying that this is about

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<v Speaker 1>a global rise in inflation impacting supply change and that

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<v Speaker 1>presented challenges for projects, etc. But various point of course

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<v Speaker 1>is it's about a lot more than just inflation impacting

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<v Speaker 1>supply chains. It's about the fact that, as he says,

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<v Speaker 1>this is simply not an economic sector. And if you

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<v Speaker 1>look at the things that he said, and then you

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<v Speaker 1>look at the way that governments are responding, it's beginning

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<v Speaker 1>to feel like he's the one who's right.

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<v Speaker 2>Yeah, I mean I think so, I feel you can.

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<v Speaker 2>I think the key thing here was Barrie's point that actually,

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<v Speaker 2>even if we you know, build an awful lot more

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<v Speaker 2>wind energy, we don't really have the ability to use

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<v Speaker 2>it because it's only turning up for work because he

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<v Speaker 2>puts it at certain points, and then you still need

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<v Speaker 2>all the backup stuff to back it up. So if

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<v Speaker 2>we are going to end up having to invest a

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<v Speaker 2>lot more startup capital basically in getting these things built,

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<v Speaker 2>then I don't really see why we aren't spending it

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<v Speaker 2>on nuclear reactors, which have got similar planning issues, you know,

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<v Speaker 2>because one thing that lots of people are complaining about

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<v Speaker 2>is that the boomer generation doesn't want to you know,

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<v Speaker 2>have to have the cables necessary to link wind farms

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<v Speaker 2>up to national grid. Well, you know, if we just

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<v Speaker 2>built you know, that a number of nuclear reactors, which

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<v Speaker 2>again you know people hate them as well, and go

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<v Speaker 2>through all the planning pain and getting them done, then

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<v Speaker 2>we'd have a reliable source of electricity and you know,

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<v Speaker 2>they kind of back up the back load electricity that

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<v Speaker 2>we need that's reliable and that you can sweatch on

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<v Speaker 2>at any point and get it. So it just seems

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<v Speaker 2>that there's a lot of capital being misallocated to this sector,

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<v Speaker 2>which is partly because in the zero interestry era, you know,

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<v Speaker 2>this all caught on and the capital misallocation didn't wasn't

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<v Speaker 2>as visible, and now it's becoming incredibly visible.

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<v Speaker 1>So one of the most interesting parts of the conversation

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<v Speaker 1>was about the extent to which even if wind was great,

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<v Speaker 1>we would need any more wind energy. So one of

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<v Speaker 1>the things that Barrier's done is looked at these many

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<v Speaker 1>discrete periods in which wind has been blowing in the

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<v Speaker 1>UK and winds not bling blowing in the UK, and

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<v Speaker 1>what happens, and what he sees is that when the

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<v Speaker 1>wind is blowing in the UK, we already have very

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<v Speaker 1>cheap power, very very cheap power, And when the wind

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<v Speaker 1>is blowing properly, the price of energy in the UK

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<v Speaker 1>goes to zero and below. So when things are going

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<v Speaker 1>well for wind, you actually have a glut of power

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<v Speaker 1>in the UK for which we have no demand because

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<v Speaker 1>we can't store it and we can't export it, so

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<v Speaker 1>it just goes to zero and that's that. So if

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<v Speaker 1>that is already happening when the wind is blowing, then

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<v Speaker 1>why would you put out more wind? And I said

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<v Speaker 1>to him, will I guess maybe the wind blows in

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<v Speaker 1>different places at different times, and that's not really how

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<v Speaker 1>it works. When there's winds wind when there is a wind,

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<v Speaker 1>there isn't wind, so you can't put out more wind farms.

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<v Speaker 1>It does not work like that, And I thought that

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<v Speaker 1>was a very interesting way of looking at We've already

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<v Speaker 1>got a glut of cheap power when the wind is

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<v Speaker 1>blowing that we can't store and we can't export it,

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<v Speaker 1>So why would we build more?

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<v Speaker 2>Genuinely? Slightly aid point? And I guess the only way

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<v Speaker 2>that I can think about it is that in some

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<v Speaker 2>ways it's a zero interest rate phenomenon, like a lot

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<v Speaker 2>of other ideas where and obviously it's a very politicized

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<v Speaker 2>one and therefore the mess allocation of capital, it's kind

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<v Speaker 2>of done by the government, and so you don't you

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<v Speaker 2>don't as rapidly get to the point where someone runs

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<v Speaker 2>out of money, basically, and I think that's basically that

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<v Speaker 2>is the best explanation for it. Beyond that, it doesn't

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<v Speaker 2>make any sense.

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<v Speaker 1>We talked a little bit about batteries, because you know,

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<v Speaker 1>he hears so much about the different types of batteries

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<v Speaker 1>that are under development, and how that thing that talks

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<v Speaker 1>about in terms of, you know, let's not put up

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<v Speaker 1>any more wind farms because we can't store it, et cetera.

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<v Speaker 1>What if we can store it, What if we can

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<v Speaker 1>surely that's the answer. So, you know, Barry and I

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<v Speaker 1>talked a bit about how we can do that, and

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<v Speaker 1>what he said was, you know, please, please don't tell

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<v Speaker 1>me that there's a battery that's just been invented and

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<v Speaker 1>it's going to start storing loads of have or cheaply

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<v Speaker 1>for a long period of time, because in the debate,

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<v Speaker 1>he says, has become very ideological and as far as

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<v Speaker 1>he can see, well, everybody wants that battery to exist.

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<v Speaker 1>We want that battery to exist so badly, but it

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<v Speaker 1>just it just doesn't. It just doesn't. And until it does,

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<v Speaker 1>then this is all all about pointless. And he said,

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<v Speaker 1>you know that the fact that everyone wants this so much,

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<v Speaker 1>and that the stocks or the companies that are involved

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<v Speaker 1>in all these things are constantly recapitalized because people want

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<v Speaker 1>it so badly. That's why so many ESG stocks and

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<v Speaker 1>particularly renewable energy stocks. Barry says, they're just the gift

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<v Speaker 1>that keep on giving because they don't go bankrupt. But

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<v Speaker 1>you know, they go to the edge of bankruptcy, which

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<v Speaker 1>is great, great for the shorts, and then they get recapitalized.

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<v Speaker 1>Here you're going to do it again and again and again,

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<v Speaker 1>writs issue after right sifty have to rights issue, and

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<v Speaker 1>he said, it's just this is a conversation we had

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<v Speaker 1>not on the podcast. He says, you know, that's just

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<v Speaker 1>a beautiful thing for a short seller, and of course

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<v Speaker 1>it's not the kind of thing that people want to hear,

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<v Speaker 1>but it's been working for Barry whos before once has

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<v Speaker 1>been spectacular. That one other thing I wanted to say

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<v Speaker 1>about all the things that we've talked about is a

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<v Speaker 1>lot of what Barrier says is very controversial, and as

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<v Speaker 1>I say, it's things that people don't want to be true.

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<v Speaker 1>So I would encourage everybody to go to the Argonaut

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<v Speaker 1>website website and look at the work the Barrier has

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<v Speaker 1>done on this and look at his data and take

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<v Speaker 1>it from there. He's written a good piece called Britain

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<v Speaker 1>is a Gonner with the Wind, which is, oh, you know,

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<v Speaker 1>quite clever, and in that is all the data. So

0:12:27.760 --> 0:12:29.920
<v Speaker 1>you know, if you if you listen to podcasts and

0:12:29.960 --> 0:12:32.559
<v Speaker 1>feel furious, which I'm sure lots of people will, then

0:12:32.640 --> 0:12:35.600
<v Speaker 1>it's important that you then go and look at the

0:12:35.640 --> 0:12:39.160
<v Speaker 1>data and see the modeling Barriers done, and you can

0:12:39.520 --> 0:12:42.679
<v Speaker 1>try and pit holes in his data rather than disagree

0:12:42.720 --> 0:12:45.520
<v Speaker 1>on an ideological path.

0:12:46.040 --> 0:12:51.440
<v Speaker 2>That fair, that's really sensible, and obviously send in your

0:12:52.559 --> 0:12:53.880
<v Speaker 2>quibbles to John.

0:12:57.440 --> 0:12:59.640
<v Speaker 1>One thing we just say is that Barrier's portfolio is

0:12:59.720 --> 0:13:04.880
<v Speaker 1>very much much position for inflation. He's expecting a high

0:13:04.960 --> 0:13:08.360
<v Speaker 1>for longer, long term inflation re environment. Excuse me, Oh,

0:13:08.400 --> 0:13:10.600
<v Speaker 1>that's what I gathered from what we talked about it.

0:13:10.640 --> 0:13:14.120
<v Speaker 1>And he's a believer as we are, in the idea

0:13:14.160 --> 0:13:18.200
<v Speaker 1>that we're at a turning point in the macro and

0:13:18.280 --> 0:13:19.439
<v Speaker 1>investing regimes.

0:13:19.520 --> 0:13:22.400
<v Speaker 3>We're buying it. But now the last couple of years

0:13:22.600 --> 0:13:24.480
<v Speaker 3>we find that as a result of all of this

0:13:24.600 --> 0:13:27.720
<v Speaker 3>money printing, which yes did get into the real economy

0:13:27.800 --> 0:13:32.679
<v Speaker 3>because the liability of those assets that the central backs

0:13:32.679 --> 0:13:36.360
<v Speaker 3>are buying ended up in terms of expanding bank deposits.

0:13:37.120 --> 0:13:41.040
<v Speaker 3>That resulted in significant inflation. That means that interest rates

0:13:41.080 --> 0:13:43.800
<v Speaker 3>have gone up. And I think what we're seeing and.

0:13:43.679 --> 0:13:46.520
<v Speaker 1>We are going to see higher rates and inflation going forward,

0:13:46.520 --> 0:13:49.920
<v Speaker 1>particularly because of the very high levels of dat across

0:13:49.920 --> 0:13:52.680
<v Speaker 1>the Western world. So if we suddenly find we're moving

0:13:52.720 --> 0:13:56.760
<v Speaker 1>into a disinflation or deflationary environment, then that may have

0:13:56.800 --> 0:13:59.200
<v Speaker 1>some impact on some of the stock seaholds.

0:13:59.520 --> 0:14:02.400
<v Speaker 2>Yeah, I think that belief and our belief is going

0:14:02.440 --> 0:14:05.920
<v Speaker 2>to be tested over the next you know, maybe six months,

0:14:06.000 --> 0:14:11.520
<v Speaker 2>maybe a year, and I you know, I personally I

0:14:11.559 --> 0:14:15.600
<v Speaker 2>think higher for longer and more inflationary than not. But

0:14:15.840 --> 0:14:19.960
<v Speaker 2>it's not It's not my strongest conviction I've ever had

0:14:20.040 --> 0:14:24.360
<v Speaker 2>by a long way. You know. I appreciate the argument

0:14:24.400 --> 0:14:26.840
<v Speaker 2>that on the one hand, governments are massively indebted, which

0:14:26.840 --> 0:14:31.320
<v Speaker 2>points they are more kind of inflationary environment overall. At

0:14:31.320 --> 0:14:34.400
<v Speaker 2>the same time, the monetarists have been right about Everton,

0:14:34.880 --> 0:14:37.800
<v Speaker 2>and you know, they're pointing to you know, kind of

0:14:37.840 --> 0:14:41.920
<v Speaker 2>like deflation coming up. So I just it's I think

0:14:41.920 --> 0:14:43.880
<v Speaker 2>it's what's being flexible about it.

0:14:44.720 --> 0:14:47.680
<v Speaker 1>I suppose the inflationary case is that the second wave hit,

0:14:47.680 --> 0:14:50.600
<v Speaker 1>any type of deflation or recession in our age of

0:14:50.720 --> 0:14:53.120
<v Speaker 1>big government, governments won't be able to hold the line

0:14:53.560 --> 0:14:56.480
<v Speaker 1>and there'll be more printing almost immediately. I think that

0:14:56.480 --> 0:14:58.720
<v Speaker 1>that's the sort of real case for higher for longer,

0:14:58.760 --> 0:15:02.120
<v Speaker 1>isn't it. From a matter first point of view.

0:15:02.720 --> 0:15:04.920
<v Speaker 2>I think that's a good argument, and I think it's

0:15:04.960 --> 0:15:07.280
<v Speaker 2>a reasonable argument, But it kind of boils down to

0:15:07.320 --> 0:15:11.280
<v Speaker 2>what the political environment is like at the time, and

0:15:11.360 --> 0:15:13.720
<v Speaker 2>you know, like obviously with Paul Volker, he was able

0:15:13.760 --> 0:15:16.520
<v Speaker 2>to tackle inflation because by then it really was public

0:15:16.600 --> 0:15:20.000
<v Speaker 2>enemy number one and everyone was you know, I mean,

0:15:20.040 --> 0:15:21.800
<v Speaker 2>nobody was happy about it. But at the end of

0:15:21.840 --> 0:15:23.840
<v Speaker 2>the day, if you had to create the economy to

0:15:23.840 --> 0:15:27.440
<v Speaker 2>get rid of inflation, then it was seen as politically acceptable.

0:15:29.720 --> 0:15:32.600
<v Speaker 2>I suspect that you're writ I think that we'd have

0:15:32.680 --> 0:15:35.480
<v Speaker 2>to go through another cycle of inflation being even worse

0:15:35.560 --> 0:15:37.920
<v Speaker 2>before we got to that point, because one of the

0:15:37.960 --> 0:15:41.200
<v Speaker 2>things for central banks this time around is that this

0:15:41.280 --> 0:15:43.320
<v Speaker 2>is the okay bit. It's like we've got we've still

0:15:43.360 --> 0:15:48.200
<v Speaker 2>got full employment, Inflation is uncomfortably high, but coming down.

0:15:49.080 --> 0:15:52.160
<v Speaker 2>Central banks have kind of been seen to do something,

0:15:52.200 --> 0:15:55.760
<v Speaker 2>but it hasn't actually really hurt anyone except for you know,

0:15:55.840 --> 0:15:58.360
<v Speaker 2>some people with mortgages and at the moment, frankly, you know,

0:15:59.040 --> 0:16:04.680
<v Speaker 2>the addage does that they can afford it. So yeah,

0:16:04.720 --> 0:16:06.480
<v Speaker 2>so I think we could we all get to a

0:16:06.480 --> 0:16:09.720
<v Speaker 2>point where we see recessionally data coming in, the central

0:16:09.760 --> 0:16:13.960
<v Speaker 2>bank's cut too fire, Stevelson starts taking off again. You know,

0:16:14.480 --> 0:16:17.480
<v Speaker 2>that's certainly that's certainly possible, and it is I guess

0:16:18.080 --> 0:16:20.520
<v Speaker 2>can a central case, but it's just not I wouldn't

0:16:20.520 --> 0:16:22.120
<v Speaker 2>want to bet that. How sot to put it?

0:16:22.120 --> 0:16:25.080
<v Speaker 1>Are we we're wearing away from talking about Barry. The

0:16:25.120 --> 0:16:27.800
<v Speaker 1>after Show is supposed to be about Barry.

0:16:27.520 --> 0:16:29.560
<v Speaker 2>Yeah, sorry Bardy, Sorry Barry.

0:16:31.880 --> 0:16:34.080
<v Speaker 1>Thanks for listening to this week's Maren Talks Money the

0:16:34.160 --> 0:16:37.560
<v Speaker 1>after Show. This episode was hosted by Me Maren Sunset

0:16:37.560 --> 0:16:39.840
<v Speaker 1>Web alongside John Steppe. Could I think I stopped in

0:16:39.880 --> 0:16:42.200
<v Speaker 1>the nack of time? It was produced by some Sardi

0:16:42.400 --> 0:16:45.080
<v Speaker 1>additional editing by Blake Maples. Finally, a few of the

0:16:45.080 --> 0:16:46.520
<v Speaker 1>things that John and I have talked about you can

0:16:46.520 --> 0:16:48.120
<v Speaker 1>look at and weep yourself if you go to the

0:16:48.160 --> 0:16:50.119
<v Speaker 1>show notes, we'll have put in a couple of links.