WEBVTT - Burnbrae’s Mellon Says Shell and BP Are Good Long-Term Investments 0:00:00.200 --> 0:00:00.480 John. 0:00:01.240 --> 0:00:05.800 You know, we talk a lot about how cheap UK 0:00:05.960 --> 0:00:08.840 equities are, I mean endlessly right, And last week we 0:00:08.920 --> 0:00:11.559 had Rob are not telling us that there is trade 0:00:11.560 --> 0:00:13.880 of the decade, etc. And you and I both agree 0:00:13.920 --> 0:00:16.760 with that, we believe in this story. But we're always 0:00:16.800 --> 0:00:20.279 so busy talking about how cheap UK equities are. We 0:00:20.520 --> 0:00:24.520 very rarely talk about how incredibly expensive American equities are. 0:00:25.239 --> 0:00:27.800 We're always looking at one end of the thing and 0:00:28.240 --> 0:00:30.800 kind of ignoring the other. Because the key thing here 0:00:30.920 --> 0:00:33.280 is it's partly the UK equity is achieap, but also 0:00:33.320 --> 0:00:36.720 that US equities are still off the scale expensive. 0:00:37.440 --> 0:00:40.960 Yeah, I mean the main reason for that maybe because 0:00:41.000 --> 0:00:49.440 we're horribly embodised, But. 0:00:46.560 --> 0:00:48.520 Why are we embarrassed? I'm not embarrassed. 0:00:48.640 --> 0:00:50.920 The basically the problem with US equities is that the 0:00:51.080 --> 0:00:55.240 art expensive. But they've been expensive for an insanely long 0:00:55.320 --> 0:00:59.480 amount of tame compared to cane like Hasterday. So and 0:00:59.520 --> 0:01:03.320 I think this is best summed up and that kind 0:01:03.320 --> 0:01:07.360 of piece of research from US as the manager's GMO. 0:01:08.080 --> 0:01:14.080 And they've got a strategies there called James Monte who excellent, Yeah, excellent, 0:01:14.160 --> 0:01:17.120 kind of right, And I remember prior to two thousand 0:01:17.160 --> 0:01:17.480 and eight. 0:01:17.600 --> 0:01:18.280 He was really on. 0:01:18.400 --> 0:01:22.080 The ball about it coming up and then afterwards. One 0:01:22.160 --> 0:01:23.840 thing that really sticks in my mind is that he 0:01:24.000 --> 0:01:28.280 wrote about this basically portfolio bombed out stocks at a 0:01:28.319 --> 0:01:31.120 time when everyone else was like, don't touch the stock 0:01:31.160 --> 0:01:33.440 market at a temper passport. And if you just bought the 0:01:33.440 --> 0:01:38.280 ones that he'd looked at, then you made like multiples 0:01:38.240 --> 0:01:40.440 there money, like probably like a tenth Do. 0:01:40.400 --> 0:01:45.800 That we read that? Well, why didn't we do that? 0:01:46.560 --> 0:01:46.760 See? 0:01:46.760 --> 0:01:48.040 I like we still here. 0:01:48.200 --> 0:01:50.720 I like to blame compliance reasons. 0:01:50.240 --> 0:01:54.000 And was complaint. 0:01:54.080 --> 0:01:57.440 Yeah, exactly. It's just it's the admin. 0:01:57.800 --> 0:01:59.200 It's the admin, isn't it. 0:02:00.360 --> 0:02:03.080 The bit of my life? If I was better admint, 0:02:03.080 --> 0:02:03.840 I would be rich. 0:02:04.840 --> 0:02:07.240 It's both of us. I mean, this is the problem, 0:02:07.280 --> 0:02:08.480 and it's one of the things that we do. 0:02:08.720 --> 0:02:10.480 I'm going off topic here, but one of the things 0:02:10.480 --> 0:02:12.760 that I always think about whenever we write anything but 0:02:13.080 --> 0:02:17.920 our reader and listeners. How big is the admin leap 0:02:18.080 --> 0:02:21.520 that they have to take to do anything? So hard? 0:02:22.160 --> 0:02:22.359 Yeah? 0:02:22.360 --> 0:02:23.360 And that's important. 0:02:23.440 --> 0:02:26.200 I mean, actually that's I mean that regardlessly of views 0:02:26.200 --> 0:02:28.640 on crypto currency, that is one of the big issues 0:02:28.680 --> 0:02:31.960 we betcoin and always was, and I see the period 0:02:32.040 --> 0:02:35.280 reason I don't want any so yes. 0:02:35.600 --> 0:02:38.000 No customer service when you get the admin wrong. 0:02:38.440 --> 0:02:41.280 Yeah, that's my problem with crypt although to be fair 0:02:41.320 --> 0:02:44.480 that that expine extends to just about every kind of 0:02:44.480 --> 0:02:46.240 service these days any week, so. 0:02:46.760 --> 0:02:50.680 You might as well by bitcoin anyway. 0:02:52.560 --> 0:02:55.120 Yeah, So back to James. Actually, so James, like in 0:02:55.120 --> 0:02:57.680 March twenty twelve, I think it was, wrote an article 0:02:57.720 --> 0:03:01.639 for GMO. The GMO have always been that's where Jeemy 0:03:01.680 --> 0:03:04.799 Grantham works, and they've always been on the value side, et. 0:03:04.720 --> 0:03:05.480 Cetera, et cetera. 0:03:05.880 --> 0:03:09.400 But he basically pointed out that US stocks were very expensive, 0:03:09.800 --> 0:03:13.600 but also US profit margins were very high. So say 0:03:13.600 --> 0:03:16.720 the long run average from about nineteen fifty was six percent, 0:03:16.840 --> 0:03:20.200 and they were running about nine percent. He came up 0:03:20.240 --> 0:03:22.800 with various reasons as to why that might be, but 0:03:23.120 --> 0:03:24.960 to be honest, they're not important just now because it's 0:03:25.639 --> 0:03:28.920 complicated istion, it's a bit a distraction. His point was 0:03:28.960 --> 0:03:32.840 that corporate margins should, in theory mean revert, so in 0:03:32.880 --> 0:03:35.040 other words, they should go back from nine percent to 0:03:35.040 --> 0:03:39.720 six percent, and therefore you would end this US out performance. 0:03:40.400 --> 0:03:42.840 And just in case anyone's wondering the reason that corporate 0:03:42.840 --> 0:03:45.800 profit margins should presumably kind of you know, mean revert 0:03:45.920 --> 0:03:49.280 is because capitalism, So you get a free market. One 0:03:49.320 --> 0:03:52.240 company starts making outside profit margins, the others come along, 0:03:52.600 --> 0:03:55.360 they all compete with each other, and the margins come down. 0:03:56.560 --> 0:03:59.440 And so obviously that didn't actually happen. Then US stocks 0:03:59.440 --> 0:04:04.000 continue to performed for the following decade, and even even 0:04:04.120 --> 0:04:07.320 now we've kind of gone back into this weird situation 0:04:07.400 --> 0:04:11.200 where we're kind of going back to growth outperforming value 0:04:11.320 --> 0:04:15.840 again despite the recent changes and interest rates, etc. And 0:04:15.880 --> 0:04:17.960 so James is a technolo look at this in a 0:04:18.000 --> 0:04:20.840 paper that you can download off the GMO website. He's 0:04:20.839 --> 0:04:22.479 basically sort of like saying, look, oh, where did I 0:04:22.520 --> 0:04:25.599 go wrong? And again, that's more about the economics side 0:04:25.600 --> 0:04:28.560 of it, and it's not actually that important to our discussion. 0:04:29.480 --> 0:04:32.680 His point low was that, Okay, I've been wrong for 0:04:32.720 --> 0:04:37.640 the past ten years. What happs if this on this one? 0:04:37.680 --> 0:04:37.920 Definite? 0:04:38.000 --> 0:04:41.719 Yeah, I recognize that ire wrong for the past ten years. 0:04:41.720 --> 0:04:44.320 What happens with profit margins just stay the same? And 0:04:44.360 --> 0:04:46.359 the point he was making was that, well, but the 0:04:46.400 --> 0:04:50.400 things valuations have increased so much that even if you 0:04:50.440 --> 0:04:52.359 think the corporate profit margins is going to stay at 0:04:52.440 --> 0:04:56.280 nine percent. US stocks are sitting on a shillerpe or 0:04:56.520 --> 0:05:01.159 a cape ratio of about thirty, which makes them as 0:05:01.200 --> 0:05:02.960 expensive as they were at the top of the tech 0:05:03.000 --> 0:05:05.600 bubble in two thousand and that that was the most 0:05:05.680 --> 0:05:08.920 expensive US stocks or stocked pretty much. 0:05:09.240 --> 0:05:12.960 Brave interruption, brave interruption. UK market is on a Shillippe 0:05:13.320 --> 0:05:15.720 more like fourteen till half the press just. 0:05:15.720 --> 0:05:19.279 Saying exactly, and then he was saying, his point is 0:05:19.320 --> 0:05:22.160 that's even if profit margins stay where they are, if 0:05:22.160 --> 0:05:24.919 profit margins do actually revert to the means to go 0:05:25.000 --> 0:05:29.000 back to the six percent overall, then if you adjust 0:05:29.400 --> 0:05:31.480 the cape for that, the cape is more like forty 0:05:31.520 --> 0:05:34.479 five fifty, and that's way higher than it was even 0:05:34.680 --> 0:05:37.880 at the dot com bubble. And again Bernmin dot com 0:05:37.920 --> 0:05:40.520 bubble was essentially the most expensive US stocks. 0:05:40.240 --> 0:05:40.840 I've ever been. 0:05:41.839 --> 0:05:43.560 And so his point was that, so even if you 0:05:43.560 --> 0:05:46.320 think everyone's going to go perfectly correct and it's going 0:05:46.360 --> 0:05:50.440 to be absolutely fine, then if margins stay high and 0:05:50.560 --> 0:05:53.240 valuations don't change, you're still looking at roughly a three 0:05:53.279 --> 0:05:58.200 percent real return based on real annual return based on 0:05:58.400 --> 0:06:01.400 GMO's views, which is slower than you would normally expect 0:06:01.440 --> 0:06:04.159 to get from equities. You know, it's not enough money 0:06:04.360 --> 0:06:06.360 to get paid for taking the risk of buying equities. 0:06:07.040 --> 0:06:10.000 And he's pointing positive, A positive real return of any 0:06:10.080 --> 0:06:11.000 kind feels kind of good. 0:06:11.080 --> 0:06:13.480 Oh yeah, but we're talking over a decade. 0:06:13.680 --> 0:06:15.839 I mean, you would have hoped that something else would 0:06:15.920 --> 0:06:18.880 do better than that, or I mean you would have hoped, right, 0:06:18.920 --> 0:06:21.000 I mean, maybe maybe it won't put I mean I 0:06:21.000 --> 0:06:23.640 think then there's linked kind of like UK points and 0:06:23.720 --> 0:06:26.400 there often a real yield of one percent over thirty years, 0:06:26.480 --> 0:06:29.320 so you know, when you look at it, three percent 0:06:29.480 --> 0:06:33.720 is not that great. So very so that's that is 0:06:33.760 --> 0:06:37.640 the kind of I've probably butchered all the academic side 0:06:37.640 --> 0:06:40.400 of that paper. But long story short, even if things 0:06:40.400 --> 0:06:43.120 go perfectly for the next ten years, US stocks are 0:06:43.360 --> 0:06:46.320 rampantly over valued, and know. 0:06:46.279 --> 0:06:48.839 They won't go perfectly. We know they won't go perfectly. 0:06:48.839 --> 0:06:51.120 Did he give any sense of what it might be 0:06:51.160 --> 0:06:53.599 that would bring those corporate margins down? Is it the 0:06:53.680 --> 0:06:56.880 return of the power of labor? Is it big glaberalization? 0:06:57.120 --> 0:06:58.880 Is it all these things that we've been talking about. 0:06:59.680 --> 0:07:00.000 Thank you? 0:07:00.400 --> 0:07:03.080 He doesn't address that in this particular piece. Because he's 0:07:03.120 --> 0:07:05.880 looking I mean, his argument and it's all about accounting 0:07:06.000 --> 0:07:09.240 identities basically, but his argument that the thing that has 0:07:09.360 --> 0:07:12.880 enabled corporate profit margins to be so high is the 0:07:12.960 --> 0:07:16.120 US running a kind of massive deficit, and that was 0:07:16.200 --> 0:07:20.240 that's the big sort of change that's happened, that kind 0:07:20.240 --> 0:07:23.520 of permanent deficit, because his argument is basically that they 0:07:23.560 --> 0:07:27.920 must be coming from somewhere over this extra money essentially, 0:07:29.120 --> 0:07:30.960 and then there's all sorts of arguments about you know 0:07:30.960 --> 0:07:33.960 what intangible assets and kind of like, you know, the 0:07:34.120 --> 0:07:35.160 tech tech companies. 0:07:36.160 --> 0:07:39.080 He said earlier, earlier in this conversation, do you want to. 0:07:41.160 --> 0:07:43.560 Now now we're finding out John didn't want to touch 0:07:43.640 --> 0:07:44.400 the detail with a. 0:07:44.480 --> 0:07:48.400 Barge ball something called the Kalei equation in there, and 0:07:48.400 --> 0:07:51.240 I'm likeing that, let's let's not let's not. 0:07:51.160 --> 0:07:53.400 Getting the listeners. 0:07:53.440 --> 0:07:54.400 You're boring them. 0:07:55.040 --> 0:07:57.240 Switched off. Sorry, come back, Jim Mellon's on that. 0:07:57.320 --> 0:07:59.600 Everyone, Come back, Jim Mellon. 0:08:00.080 --> 0:08:02.040 Listen, We're going to talk to somebody now who doesn't 0:08:02.080 --> 0:08:10.720 make very many errors at all. Welcome to Meren Talks Money, 0:08:10.760 --> 0:08:13.080 the podcast in which people who do know the markets 0:08:13.200 --> 0:08:16.360 explain the markets. I'm Maren zumset web this week a 0:08:16.360 --> 0:08:19.000 conversation with Jim Mellon, chairman of Burnberry and well known 0:08:19.000 --> 0:08:19.840 invest in gurup. 0:08:22.000 --> 0:08:24.400 Jim, thank you so much for joining us. It is 0:08:24.560 --> 0:08:25.920 lovely to have you on today. 0:08:26.040 --> 0:08:27.240 Great to be here. Thank you. 0:08:27.440 --> 0:08:30.160 Now listen. I did, and I'm sorry about this. In fact, 0:08:30.200 --> 0:08:33.400 I'm really sorry about this. But before I sat down 0:08:33.520 --> 0:08:38.800 to record, I asked on Twitter what questions any of 0:08:38.840 --> 0:08:41.640 my followers might have for you, And then I sat 0:08:41.720 --> 0:08:45.400 back to wait for lots of interesting conversations on you know, 0:08:45.480 --> 0:08:50.080 out of weather, inflationary times, and biotechnology and agronomics and 0:08:50.080 --> 0:08:51.400 all kinds of technology, etc. 0:08:51.920 --> 0:08:52.880 Instead of which. 0:08:52.679 --> 0:08:55.520 They all said, ask him how he thinks Brexit is going. 0:08:56.120 --> 0:08:57.960 So I'm sorry we have to start there. 0:08:58.400 --> 0:08:59.960 Well, it's a reasonable question. 0:09:00.360 --> 0:09:04.000 I mean, obviously it's neither going as well as the 0:09:04.040 --> 0:09:07.480 Brexiteers would have hoped, nor as badly as the remainers 0:09:07.720 --> 0:09:08.160 would have. 0:09:09.720 --> 0:09:10.240 Suggested. 0:09:10.280 --> 0:09:12.959 I'm not sure hoped, but I think hoped is fair. 0:09:13.520 --> 0:09:15.520 I can't say there's a lot of good stuff. I 0:09:15.559 --> 0:09:17.960 can't say a lot of good stuff about the government's 0:09:19.040 --> 0:09:23.680 handling of the situation. And as you know, if it 0:09:23.720 --> 0:09:26.319 had been me in charge or you in charge the 0:09:26.400 --> 0:09:29.280 day after Brexit, we would have applied for a Norwegian 0:09:29.360 --> 0:09:32.680 style trade agreement with the European Union, which would have 0:09:32.679 --> 0:09:36.080 been so much better than the current situation. I mean, 0:09:36.120 --> 0:09:39.400 I think that, you know, things are getting better rather 0:09:39.440 --> 0:09:44.920 than worse. And I don't believe all the predictions, which 0:09:45.040 --> 0:09:47.920 as you know, are generally wrong. About four percent of 0:09:48.440 --> 0:09:51.280 GNP is going to be lost over the next ten 0:09:51.360 --> 0:09:54.160 years or whatever as a result of Brexit, and I 0:09:54.280 --> 0:09:59.319 do see there are some signs of equilibrium, and particularly 0:09:59.320 --> 0:10:01.839 in services trade, where the UK is doing very well 0:10:01.880 --> 0:10:05.760 at the moment, funnily enough. But overall, you know, I've 0:10:05.760 --> 0:10:10.280 got my regrets. I mean, that's simple as that. And 0:10:10.720 --> 0:10:14.640 although I didn't have a vote in the referendum, I 0:10:14.679 --> 0:10:17.880 think I would have been neutral as opposed to have 0:10:17.960 --> 0:10:21.480 been so in favor of it. I mean, I think 0:10:21.520 --> 0:10:24.400 it's caused much more chaos than I would have expected. 0:10:24.760 --> 0:10:28.840 I'm not saying that we should now try and rejoin, 0:10:28.920 --> 0:10:31.760 because I think that that's probably not the best thing, 0:10:31.800 --> 0:10:34.400 but we should definitely try and do this Norway arrangement 0:10:34.600 --> 0:10:39.319 or EA arrangement that should have been done ab initio. 0:10:39.559 --> 0:10:41.719 It's been very badly handled by the Tories. I mean, 0:10:41.880 --> 0:10:45.240 I think you and I are both worried about a 0:10:45.320 --> 0:10:48.280 labor government, and so we should be. But the Tories 0:10:48.280 --> 0:10:51.000 have really not covered themselves in glory in any respect 0:10:51.080 --> 0:10:53.360 in the last five years or six years. 0:10:53.880 --> 0:10:55.880 No, it's interesting they've been empowered for a long time. 0:10:55.920 --> 0:10:58.240 It's hard to see the positives they. 0:10:57.880 --> 0:11:00.160 Leave behind them. And I agree with you on that 0:11:00.160 --> 0:11:02.760 that like a lot of sort of semi soft Brexiteers. 0:11:03.200 --> 0:11:06.600 I kind of assumed that after type arrangement would be 0:11:06.600 --> 0:11:09.360 come to very quickly, but I'm increasingly seeing evidence that 0:11:09.400 --> 0:11:11.560 we will come to pretty much that kind of deal. 0:11:11.559 --> 0:11:13.839 It's just taking quite a long time. So now when 0:11:13.880 --> 0:11:16.600 anyone asks me how I think Brexit's going, I'm falling 0:11:16.640 --> 0:11:19.280 back on too early to tell, which I think it 0:11:19.320 --> 0:11:23.640 probably probably is, Which it probably is, But there is 0:11:23.720 --> 0:11:28.360 I mean, there is a big positive to Brexit for investors, 0:11:28.440 --> 0:11:31.880 and it's a long term positive, which is that by 0:11:32.000 --> 0:11:35.720 discouraging international investors from coming into our market in the 0:11:35.760 --> 0:11:39.200 shorter term, we've had what been great Brexit discount and 0:11:39.520 --> 0:11:43.880 anything else discount on our equity market. And that's I think, 0:11:44.000 --> 0:11:46.800 and John and I both written about this endlessly, and 0:11:46.800 --> 0:11:49.760 I think we're beginning to see people beginning to agree 0:11:49.800 --> 0:11:52.760 with us. That's made the UK equity market phenomenally cheap 0:11:52.800 --> 0:11:56.040 and a phenomenally good long term opportunity for investors. And 0:11:56.120 --> 0:11:58.319 you and I've discussed this before, but are you're still 0:11:58.320 --> 0:11:59.320 on board with that view? 0:11:59.520 --> 0:12:00.520 Yeah? I am. 0:12:00.600 --> 0:12:04.600 And you know, we talked around a year ago about 0:12:04.600 --> 0:12:07.680 exactly this, and actually the UK market's not done so 0:12:07.800 --> 0:12:11.720 badly since then, and the pand has been relatively strong, 0:12:12.160 --> 0:12:14.400 and I think it will continue to be strong. That 0:12:14.520 --> 0:12:18.280 having been said, you know, if the British government wasn't 0:12:18.320 --> 0:12:23.280 intent on throwing molotov cocktails in the way of a 0:12:23.320 --> 0:12:27.320 relatively robust economy in the form of increased corporation tax, 0:12:28.120 --> 0:12:31.560 stealth taxes by raising by basically putting more people into 0:12:31.559 --> 0:12:36.520 the forty percent tax band, and all sorts of other taxes, 0:12:36.600 --> 0:12:40.280 as well as you know, not unpicking regulations that should 0:12:40.280 --> 0:12:41.800 have been unpicked ages ago. 0:12:41.640 --> 0:12:45.959 Well and adding more regulation on top relentless editions of regulation. 0:12:46.080 --> 0:12:49.240 So we suffer from this sort of huge heaviness of 0:12:49.360 --> 0:12:51.839 regulation before we even start on anything else. I was 0:12:51.880 --> 0:12:54.320 thinking about this the other day wheneveryone was complaining on 0:12:54.440 --> 0:12:57.000 the same day about too much regulation in the UK 0:12:57.080 --> 0:12:59.600 economy and more and more regulation coming in and at 0:12:59.640 --> 0:13:03.120 the same time time complaining about obesity in and the 0:13:03.120 --> 0:13:05.079 effect that that has on the NHS. And it's like 0:13:05.160 --> 0:13:07.440 it's the same kind of thing, you know, these big 0:13:07.480 --> 0:13:11.720 sort of burdens weighing down our NHS, of weighing down 0:13:11.760 --> 0:13:13.719 our economy on the other hand, and what do. 0:13:13.679 --> 0:13:14.320 We do about them? 0:13:14.360 --> 0:13:16.320 And are we taking the crab interrupted? 0:13:16.400 --> 0:13:18.160 You you carry on, you carry on. 0:13:18.559 --> 0:13:19.760 No, but I'm with you. 0:13:19.840 --> 0:13:24.640 I mean, you know, why is the government so damned 0:13:24.679 --> 0:13:29.559 incompetent And you know, it's just it beggars belief really. 0:13:29.880 --> 0:13:32.160 You know, there are obviously some very good ministers out there. 0:13:32.800 --> 0:13:34.839 I don't think Richie's doing a bad job. He seems 0:13:34.880 --> 0:13:37.880 to have stabilized the ship and you know he internationally 0:13:37.960 --> 0:13:41.000 he's doing quite well. But there's just so much more 0:13:41.040 --> 0:13:44.439 that could be done. And they had an eighty seat majority. 0:13:44.480 --> 0:13:46.200 I mean, they could have done so much. He could 0:13:46.200 --> 0:13:51.280 have done anything they wanted, and it's just a wasted opportunity. 0:13:51.920 --> 0:13:52.800 They haven't been said. 0:13:52.880 --> 0:13:54.920 You know, I read and I don't mean to say 0:13:54.920 --> 0:13:57.679 I read it in any great detail or with great 0:13:57.720 --> 0:14:00.600 linguistic skill, but I read the French newspaper her every day, 0:14:00.640 --> 0:14:03.640 and I read built Sitong, which is Germany's equivalent to 0:14:03.679 --> 0:14:07.960 the Sun, every day. And you know, we think that 0:14:08.000 --> 0:14:11.440 we're in this sort of economic malaise that's specific to 0:14:11.480 --> 0:14:13.760 the UK, It's just not true. Every other country in 0:14:13.800 --> 0:14:17.400 Europe thinks it's in a dire situation as well. And 0:14:17.559 --> 0:14:19.680 there's a lot of inward looking stuff going on in 0:14:19.720 --> 0:14:23.840 Europe as well as in the United States. So while 0:14:23.920 --> 0:14:27.000 we hunters going on about how we're talking ourselves into, 0:14:27.720 --> 0:14:31.200 you know, going backwards economically, every other country that I 0:14:32.240 --> 0:14:34.760 can read their press of is doing exactly the same, 0:14:35.000 --> 0:14:36.680 and including where I spend a lot of time, which 0:14:36.720 --> 0:14:37.280 is in Spain. 0:14:37.640 --> 0:14:38.440 Okay, So is. 0:14:38.400 --> 0:14:40.520 There still value in the UK equity market with that 0:14:40.640 --> 0:14:43.240 in mind, and if everyone's talking themselves into a funk 0:14:43.560 --> 0:14:46.600 and UK equities which are certainly at the top end, 0:14:46.680 --> 0:14:50.560 very international anyway, trading at a thirty five forty percent 0:14:50.600 --> 0:14:53.520 discount to similar companies in the US, seems like a 0:14:53.520 --> 0:14:54.680 no brainer to buy those. 0:14:55.400 --> 0:14:59.120 Yeah, I completely agree, And you know, I'm sure that 0:14:59.240 --> 0:15:05.360 the the large sort of fossil fuel related companies like 0:15:05.480 --> 0:15:08.720 Shell and BP are good long term investments. I'm sure 0:15:08.720 --> 0:15:11.240 that our defense stocks are good long term investments. I'm 0:15:11.280 --> 0:15:14.240 sure that our financial services companies are good long term investments. 0:15:14.240 --> 0:15:17.840 We're not likely the US banking system, where basically the 0:15:17.880 --> 0:15:21.560 money market funds have completely upended the whole banking model 0:15:21.640 --> 0:15:23.840 for regional banks, and where there are far too many 0:15:23.880 --> 0:15:26.800 banks in the first place. I think the insurance companies 0:15:26.840 --> 0:15:30.560 are also attractive. Some of our investment trusts are attractive 0:15:30.560 --> 0:15:32.160 to buy. There's a whole plethora of stuff that you 0:15:32.200 --> 0:15:35.480 can buy in the UK with long term confidence, whereas 0:15:35.760 --> 0:15:37.440 you know, if you buy something in the US, you 0:15:37.480 --> 0:15:41.280 are paying a very distinct premium at a time when 0:15:41.760 --> 0:15:44.120 you know earnings are all time high as a percentage 0:15:44.120 --> 0:15:46.800 of GDP in the US and are probably going to 0:15:46.800 --> 0:15:47.440 start falling. 0:15:48.440 --> 0:15:50.920 So yeah, I'm with you. 0:15:51.000 --> 0:15:53.640 Let's buy the UK and carry on buying the UK. 0:15:54.120 --> 0:15:57.920 And you know, as for London losing its position as 0:15:57.960 --> 0:16:01.560 the largest market in Europe, well, I actually don't think 0:16:01.560 --> 0:16:05.040 it really matters. London is still the pre eminent, or 0:16:05.080 --> 0:16:09.000 at least equal pre eminent financial capital in the world. 0:16:09.600 --> 0:16:13.960 There's no sign that it's losing its pre eminence in 0:16:14.000 --> 0:16:16.520 the whole of Europe. Only a trickle of people have 0:16:16.600 --> 0:16:21.560 moved elsewhere, and as I said at the beginning, services 0:16:21.600 --> 0:16:24.520 exports are an all time high from the UK, which 0:16:24.560 --> 0:16:29.120 is our main strength. So although you know the government's 0:16:29.160 --> 0:16:32.760 doing everything it can to sort of put the reins 0:16:32.800 --> 0:16:35.560 on the economy, the economy is being remarkably resilient. And 0:16:35.600 --> 0:16:38.240 there's no doubt in my mind, and I said this 0:16:38.360 --> 0:16:42.520 from September last year onwards that rather than being the 0:16:42.560 --> 0:16:45.600 weakest economy in the G seven, this year will be somewhere. 0:16:45.360 --> 0:16:45.880 Near the top. 0:16:46.640 --> 0:16:50.760 The UK is remarkably resilient as an economy. And we 0:16:50.840 --> 0:16:53.320 also have the effect, whether you like it or not, 0:16:53.440 --> 0:16:57.880 and I actually don't mind it, of very very fast 0:16:57.920 --> 0:17:03.840 flowing inward immigration and that is going to add to 0:17:04.200 --> 0:17:06.280 our economy in coming years. 0:17:06.920 --> 0:17:09.680 I mean, it's not as to our economy as to 0:17:09.680 --> 0:17:12.880 our economy in terms of GDP, but we're not sure 0:17:12.920 --> 0:17:15.879 that it adds in terms of GDP per head. Oh 0:17:15.960 --> 0:17:19.080 we which is the thing that really matters. We're not 0:17:19.280 --> 0:17:23.280 really interested in what the overall GDP of the UK is. 0:17:23.359 --> 0:17:27.280 We're interested in whether individuals are seeing their incomes rise 0:17:27.320 --> 0:17:31.680 and their living standards rise. We don't necessarily see that 0:17:31.800 --> 0:17:34.600 with large waves of immigration governments like it because it 0:17:34.600 --> 0:17:36.600 means they can say, oh, no, GDP is going up, 0:17:36.960 --> 0:17:40.520 But do individuals like it if it's not actually improving 0:17:40.560 --> 0:17:42.359 their personal standard of living? 0:17:42.520 --> 0:17:44.879 Well, that's a very good point, and I think in 0:17:44.920 --> 0:17:47.880 the short term, almost certainly, it's going to. 0:17:47.800 --> 0:17:49.760 Be diluted of GDP per capita. 0:17:51.160 --> 0:17:54.080 And you know, I think there's a couple of things 0:17:54.080 --> 0:17:57.520 that can be done about that, including allowing migrants to 0:17:57.560 --> 0:18:00.960 work much earlier or even I wouldn't forcing them, but 0:18:01.160 --> 0:18:04.159 making it attractive for them to work, and secondly training 0:18:04.200 --> 0:18:08.800 them in skill sets that the UK is lacking in. 0:18:09.040 --> 0:18:12.080 And I think also importantly that we need to target 0:18:12.119 --> 0:18:15.560 migrants who are of a younger demographic because you know, 0:18:15.680 --> 0:18:20.200 if XYZ comes in and then brings his whole elderly 0:18:20.560 --> 0:18:24.719 relative cohorts with him or her, that is definitely going 0:18:24.760 --> 0:18:28.000 to constitute a drain on the resources of the economy. 0:18:28.520 --> 0:18:32.879 But longer term, every single developed country, including the one 0:18:32.920 --> 0:18:36.959 I'm going to tomorrow, in particular Singapore, is facing a 0:18:37.200 --> 0:18:41.160 major demographic crisis. You've talked about this before, I've talked 0:18:41.160 --> 0:18:44.560 about it, but it's actually becoming It's one of those crises. 0:18:44.080 --> 0:18:45.760 That doesn't really hit you until it hits you. 0:18:46.600 --> 0:18:51.280 We're basically facing population collapse in many countries around the world, 0:18:51.280 --> 0:18:55.120 and far from discouraging migrants in ten or twenty years time, 0:18:55.119 --> 0:18:57.359 will be begging them to come to the UK, or 0:18:57.359 --> 0:19:00.639 to Germany or to wherever else is sure of people. 0:19:00.760 --> 0:19:03.640 And although we're not on hand, if this. 0:19:03.720 --> 0:19:06.320 Is a global dynamic, which it will become, there aren't 0:19:06.320 --> 0:19:08.400 that many countries left in the world where the population 0:19:08.520 --> 0:19:10.600 is growing very fast, and very few left, and mostly 0:19:10.600 --> 0:19:14.879 in Sub Saharan Africa, whether patiliarated through over four or five. Right, So, 0:19:15.359 --> 0:19:19.960 if we're suffering from the potential for populations to decline 0:19:20.240 --> 0:19:23.800 in western countries now and in pretty much every other 0:19:23.880 --> 0:19:26.960 country over the next few decades, should we be trying 0:19:27.000 --> 0:19:30.200 to deal with this problem by pushing other people's kids, 0:19:30.560 --> 0:19:33.000 or should we be trying to find a way to 0:19:33.560 --> 0:19:36.600 manage our economies in our societies such that we can 0:19:36.640 --> 0:19:39.159 cope with our aging populations that we're going to give you. Japan, 0:19:39.240 --> 0:19:41.680 for example, which is ahead of the game here and 0:19:41.720 --> 0:19:44.880 there's been beginning to figure out ways to make it work. 0:19:45.320 --> 0:19:47.879 Rather than thinking, jeez, we can't be doing without young people. 0:19:47.920 --> 0:19:49.360 Let's get someone else's in well. 0:19:49.440 --> 0:19:51.520 Japan's are very as you know much better than me, 0:19:51.560 --> 0:19:54.160 that Japan's a very particular country. 0:19:53.840 --> 0:19:55.720 And the sense of it, it really doesn't. 0:19:55.800 --> 0:20:01.720 It's quite xenophobic, and it definitely not multicultural by any 0:20:01.840 --> 0:20:07.480 stretch of the imagination. And Japan also has an older 0:20:07.480 --> 0:20:10.080 population that is quite happy. A lot of them are 0:20:10.119 --> 0:20:13.320 quite happy to go out and work and continued to 0:20:13.359 --> 0:20:16.560 be employed at lesser salaries than they got when they 0:20:16.600 --> 0:20:21.399 were at the peak of their careers. And admittedly a 0:20:21.400 --> 0:20:23.200 lot of it is non jobs, you know, just sort 0:20:23.240 --> 0:20:26.200 of like opening and shutting barriers and things like that. 0:20:26.240 --> 0:20:30.359 But flag waving a very very different society to ours. 0:20:30.400 --> 0:20:31.239 I'm sure you know this. 0:20:31.359 --> 0:20:34.040 But by two thousand and seventy, which is not that 0:20:34.160 --> 0:20:37.440 far off, more than half of the G seven's population 0:20:37.520 --> 0:20:40.320 will be over sixty five years old. And in some 0:20:40.880 --> 0:20:45.160 of those countries, not ours, but including out I don't know, well, yeah, 0:20:45.359 --> 0:20:48.520 we'll be over sixty five fifty Well, you know, we 0:20:48.600 --> 0:20:50.800