Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Merrin
Speaker 1: Talks Money Market Rap. What are we talk about the
Speaker 1: biggest moves in the markets this weekend?
Speaker 2: What is driving them? I am Maren Sunset Web as
Speaker 2: you're at large with Bloomberg UK Wells.
Speaker 3: And I'm joined steering senior report and author of the
Speaker 3: Money Distilled Newslater.
Speaker 2: Morning John Man, Morning John. I think it's morning John.
Speaker 2: I'm not even sure anymore whether this is a truth.
Speaker 3: Day or not a truth day, but well beas I
Speaker 3: just look at what was Hampton in the market, and
Speaker 3: the oil praise today is up, so it must be
Speaker 3: our war O day.
Speaker 2: It's a war on day, not a war on day.
Speaker 1: Okay, So here is the question? Then, is this just
Speaker 1: where we are now? We're now in We're not in
Speaker 1: an extreme crisis mode when it comes to war, not
Speaker 1: in a constant let's or bomb each other mode. We're
Speaker 1: in a constant mini crisis no one knows quite what's
Speaker 1: going on, rolling mode, which is totally different.
Speaker 3: I suppose that's one way to the state of permanent
Speaker 3: kind of hubbubs, a.
Speaker 1: Permanent hubbub, but not necessarily a state of permanent war. Yeah.
Speaker 3: I mean, well, I guess what was the problem here
Speaker 3: is that every one wants an off ramp, but the
Speaker 3: two sides can't agree or in satisfactory or ramp.
Speaker 1: Yes, but that rather suggests that we're on a very
Speaker 1: very very long, super messy off ramp. Everyone wants both
Speaker 1: sides kind no one really wants to keep going. Iran
Speaker 1: doesn't really get one to get too much more involved
Speaker 1: with irritating someone who's unpredictable, so provocative, et cetera. And
Speaker 1: Trump is a bit nervous about taking anything further in
Speaker 1: case they also PYPA really does get very severe.
Speaker 2: So everyone kind of wants the offer. They almost to
Speaker 2: agree to everything.
Speaker 1: But so we are on one, just a slightly abnormal one,
Speaker 1: and somehow markets have to work around that. But if
Speaker 1: markets are supposed to look at the look to the
Speaker 1: long term, maybe markets are right about kind of ignoring
Speaker 1: at all if we are on an elongated, long off.
Speaker 3: Rep I think that's a little bit too upbeat, I think, John.
Speaker 1: I'm trying to make this podcast more upbeat.
Speaker 2: Don't know.
Speaker 3: People love a bit of doom and gloom. No, I
Speaker 3: think that Actually I was looking at kind of markets
Speaker 3: this week, so the UK, particularly in some of them
Speaker 3: those was there was a couple of kind of significant
Speaker 3: sort of offit warnings, and mine was from Chris Nicholson,
Speaker 3: which is a host builder, and basically last month they
Speaker 3: said it looked as if things were faint and near
Speaker 3: the end of last mind so the war had been
Speaker 3: you know, running for about our minds and they said
Speaker 3: it's basically okay, you don't need to worry. And then
Speaker 3: this Mondic came out with a trading update. They basically said, well, actually, no,
Speaker 3: things have actually turned down quite a bit and now
Speaker 3: we're going to he doesn't look as if we're going
Speaker 3: to sell any land this year. And also, you know,
Speaker 3: our profit's going to be much lower than we expected
Speaker 3: because we're gonna have to kind of rain everything in.
Speaker 3: And the share price felt something like thirty five percent
Speaker 3: in the day. And then you have big consumers Goods
Speaker 3: group wreck Ad beenkerser. They came out their share price
Speaker 3: has been fallen since February, but on the day they
Speaker 3: fell by an our five percent because you know, they
Speaker 3: said that the disruption the Middle East is our sales
Speaker 3: l like for like sales much lower than they expected.
Speaker 3: And I think what this kind of drives home is
Speaker 3: that the market is now at the point where it
Speaker 3: can't really put a price on stuff until it starts
Speaker 3: to see the impact coming through. And I think that's
Speaker 3: the problem we sort of set there, and it's so reflexive.
Speaker 3: It's like, we look at the prices, we say, well,
Speaker 3: the market's not reacting, so it can't be that bad.
Speaker 3: But but the market is waiting to get data from
Speaker 3: the real world because it's kind of like, well, you know,
Speaker 3: how do we know what's going to happen next? There
Speaker 3: is no way you put a praace on it. So
Speaker 3: I think we're just going to keep seeing this As
Speaker 3: the bad data feeds through, maybe some of the kind
Speaker 3: of impacts that we thought we were going to see
Speaker 3: earlier on will start to happen because they basically you
Speaker 3: need a can approve it moment, particularly because everyone's got conditioned.
Speaker 1: This is very different to how I think we've thought
Speaker 1: of markets in the past. We thought of markets as
Speaker 1: being a predictive machine to a degree. You know, not
Speaker 1: everything is priced in always, of course it isn't there
Speaker 1: ridiculous idea, but quite often you say, well, you know,
Speaker 1: markets a pretty clever and they're pricing a lot of
Speaker 1: stuff in an advance, and now you're suggesting there's this
Speaker 1: different environment and the market is not pricing things in.
Speaker 2: It's waiting till things actually happen. It's not predictive, it's
Speaker 2: reactive to reality.
Speaker 3: Well, I guess it ties with this overall thing that,
Speaker 3: you know, whatever. The kind of the twenty tens were
Speaker 3: like the long duration decade, but it basically time didn't matter,
Speaker 3: and that was partly tied up with interest rates. We know,
Speaker 3: the kind of far future. If you were going to
Speaker 3: make a load of money in the far future, that
Speaker 3: was worth as much as making a load of money tomorrow.
Speaker 3: So you bought the companies that were going to make
Speaker 3: a load of money in the far future because the
Speaker 3: future seemed predictable, because I think the predictability horizon of
Speaker 3: the world generally has shrunk to like massively. So it's
Speaker 3: a kind of short duration world. And that's also reflected
Speaker 3: in the market's sense of visibility if you want to
Speaker 3: get high fluting about it. Otherwise you could just say
Speaker 3: nobody knows what's going to happen next, particularly whenever you
Speaker 3: know trum poor Theranians can turn around and say something
Speaker 3: completely different from day to day, so I just think
Speaker 3: the markets. It's rational that the market's discounting ability has
Speaker 3: shrunk massively.
Speaker 1: I want to talk briefly about the UK and that
Speaker 1: you know, we've been very positive on the UK stock
Speaker 1: market but very negative on the UK economy, and I
Speaker 1: remain pretty negative on the UK economy, in fact, very
Speaker 1: negative on the UK economy. But there have been some
Speaker 1: very sort of slightly positive things happening right, mildly stronger
Speaker 1: than expected GDP growth in February, or that we only
Speaker 1: half care about that because that was February before the war.
Speaker 1: A slight fall in UK unemployment that again wasn't ad
Speaker 1: per expected, although you could argue that that's simply to
Speaker 1: do with people just going, well, they give up.
Speaker 2: I give up. Now we're going to get a job,
Speaker 2: so I give up. And there's also a very interesting.
Speaker 1: Conversation to be had around that, whether that's to do
Speaker 1: with effectively the UK being on the edge of a recession,
Speaker 1: or whether it's to do with AI.
Speaker 2: I suspect the former, but I know a lot of
Speaker 2: other people think I think the other.
Speaker 1: And the final thing that has happened additionally out this
Speaker 1: week is there's some news of the UK budget deficit
Speaker 1: is slightly lower than you might have expected at a
Speaker 1: three year low and again, and that sounds good, but
Speaker 1: it's worth remembering that we still do have a will
Speaker 1: been great deficit, and the debt is still building, and
Speaker 1: that that fall in borrowing is presumably connected to the
Speaker 1: sharp rise in taxes, which may still have a laver
Speaker 1: of reaction over the next few years. You know, you
Speaker 1: get when you put up taxes. Initially you normally get
Speaker 1: a revenue bounce, but then people are just their behavior
Speaker 1: and that revenue bounce mildly disappears anyway. Nonetheless, nonetheless, if
Speaker 1: you wanted to, you could have a go dragging dragging
Speaker 1: some sparkle out of these three things.
Speaker 3: You can.
Speaker 1: And I mean, I.
Speaker 3: Actually think the underlying strength of the UK economy is
Speaker 3: better than most people had thought, and have thought that
Speaker 3: for a while. And I do think the biggest problem
Speaker 3: the UK has is the head went from bad governance
Speaker 3: and it's been like that for a long time. It's
Speaker 3: not just labor's fault, but of certainly kind of raised
Speaker 3: it to you know that as bad as the previous
Speaker 3: law at least, and so you know, we've got I mean,
Speaker 3: if you look at the PMS came out today, so
Speaker 3: their snapshots activity and services and manufacturing industries much much
Speaker 3: better than expected. And these are for April, and partly
Speaker 3: that's probably you know, companies kind of stalking up ahead
Speaker 3: knowing that things are going pear shaped in the Middle East.
Speaker 3: But the point is that none of these economic figures
Speaker 3: by themselves or the certainly not taken together a point
Speaker 3: in the economy that is in like massive distress. But
Speaker 3: the I mean, the sentiment indicators are just off the
Speaker 3: chaps bad. You know, there was that we saw a
Speaker 3: nip Sauce consumer confidence reading yesterday that shows that people
Speaker 3: are gloomy than they were ahead of two thousand and
Speaker 3: eight and in nineteen seventy nine of all times. So
Speaker 3: there's a there's a bit of a weird disconnect, which
Speaker 3: I think is probably driven by people hating inflation. I
Speaker 3: think I think inflation is probably the big drivery most
Speaker 3: people misery, because everyone feels poor and feels that they're
Speaker 3: being ripped off and doesn't see things getting any better.
Speaker 3: But yeah, the underlying economy is not too bad. I
Speaker 3: think the big risk is that if interest rates stay
Speaker 3: where they are or even go up a bit because
Speaker 3: of you know, they kind of energy crisis that we're
Speaker 3: probably facing. Then that will knock a lot of that
Speaker 3: on its head, particularly things like the housing market and
Speaker 3: the wealth effect from that such as I mean.
Speaker 1: This is I was going to say, people hate inflation,
Speaker 1: but one thing that's really really difficult is general inflation
Speaker 1: combined with falling house prices.
Speaker 2: That's very hot. A lot of Britt's tough gig.
Speaker 3: Well, yeah, and you see all these news stories in
Speaker 3: the papers at the moment, but people saying, oh, I
Speaker 3: can't sell my you know, X, y Z house for
Speaker 3: this price, and obviously these solutions will cut the price.
Speaker 3: The problem is people spent so long. Yeah, but people
Speaker 3: spent so long thinking that how is what the X
Speaker 3: And the other thing is when you look at the
Speaker 3: prices from when they bottom, and this goes back to
Speaker 3: what we talked about the other day, they haven't actually
Speaker 3: made any money in real tails, even if they get
Speaker 3: to sell them for the prices that they can't sell
Speaker 3: them for. So I think people are waken up to
Speaker 3: what is actually quite a big hall in their household
Speaker 3: psychological balance sheet.
Speaker 1: Yes, yeah, so it is interesting and I've got we've
Speaker 1: got an interview coming out with Andy heldin soon and
Speaker 1: when I who used to be the economist at Bank
Speaker 1: of England. And one of the things that we talk
Speaker 1: about in that is something that we've talked about and
Speaker 1: I think with Russell Napier and other people previously, which
Speaker 1: is about her actually household balance shees but house ord
Speaker 1: balance sheets are in really good, really good shape. You know,
Speaker 1: the UK household sectors really deleveraged over the last decade
Speaker 1: and you know, were they to feel confident, a lot
Speaker 1: a lot of good economic stuff could happen in the UK,
Speaker 1: but they really really don't.
Speaker 2: Okay, So that's that bit of misery. So so much
Speaker 2: for facts for that.
Speaker 1: John Plea's well briefly to talk about this business of
Speaker 1: pinsion mandation and this idea that pension funds could be
Speaker 1: forced to invest in particular areas of interest to the
Speaker 1: government and that there's been some changes there and has
Speaker 1: loads this.
Speaker 3: Week, Yeah, thankfully. So basically so we know the Mantion
Speaker 3: House Accord was like a voluntary agreement with seventeen of
Speaker 3: the biggest pension providers in the UK to stick ten
Speaker 3: percent of DC pensions into private assets and five percent
Speaker 3: of those had to be in the UK. Now, okay,
Speaker 3: let's park whether that's a stupid well, it is a
Speaker 3: stupid idea, but let's part that. So the Government in
Speaker 3: the Pensions Bill, rather than saying okay, well, these guys
Speaker 3: have agreed to do this, that's fine, they're stuck in
Speaker 3: this clause which basically says that if they don't do it,
Speaker 3: we can force them to do it. And not only
Speaker 3: can we force them to do what they've said they
Speaker 3: do in the Mansion House agreement, we can force it
Speaker 3: is completely uncapped. We can tell them to invest in
Speaker 3: anything at all. The House of Lords thankfully kicked that
Speaker 3: back and said, no chance, that's not happening. The Government
Speaker 3: came back and said, well, okay, we will just be
Speaker 3: able to mandate basically to the limits of what the
Speaker 3: Mansion House thing says, so ten percent and private assets.
Speaker 3: And last night the House of Lords voted against that
Speaker 3: again and pinged it back to them. And so now
Speaker 3: basically unless the Government kind of backs down on those,
Speaker 3: chances are reasonable that actually the whole Pensions Bill will collapse,
Speaker 3: you know, or rather it won't get through in this
Speaker 3: parliamentary session. And the thing is, the Pensions industry is
Speaker 3: not especially happy about that because they actually like a
Speaker 3: lot of the other changes, which you can't go through here.
Speaker 3: But but the point is, you know, I don't know,
Speaker 3: I'm kind of grateful for the House of Lords here.
Speaker 3: It's nice to see that someone's at least attempting to defend,
Speaker 3: you know, our freedom to invest in what we feel
Speaker 3: we should be investing in, rather than having it dictated.
Speaker 2: To I didn't know you were usually anti the hazard Lords.
Speaker 3: Well, I'm not. I'm actually quite pro the House towards
Speaker 3: It's one of these things that walks a lot a
Speaker 3: bit of in practice than it does in theory.
Speaker 1: Absolutely, and it's worked very well for many, many hundreds
Speaker 1: of years, which maybe leave it alone.
Speaker 2: Anyway, that's not our area.
Speaker 3: We are not political at all.
Speaker 2: Yeah, we are not political. On the subject of pensions.
Speaker 1: We were talking the other day, you and I about NEST,
Speaker 1: the publicly backed pension fund that thirteen and a half
Speaker 1: fourteen million people have their utenoal pensions in, and how
Speaker 1: we're not.
Speaker 2: One hundred percent impressed, and you're writing about this week.
Speaker 2: But also there was a letter this.
Speaker 1: Week that went from the regulated the pension funds warning
Speaker 1: them that they need to keep an eye on their liquidity,
Speaker 1: and also that they will face or could face, huge
Speaker 1: costs if they sell their private assets. And I thought
Speaker 1: that was very interesting. Costs, right, costs, by which we
Speaker 1: partly mean actual costs defensive sell private stuff, but by
Speaker 1: which we also mean losses.
Speaker 3: Yeah, yeah, selling us a discount. It's almost it's almost
Speaker 3: like these people who think, well, I can't sell my
Speaker 3: house for the stated nave, like, well, that's because it's
Speaker 3: not worth the stated nav There was a really good
Speaker 3: paper actually from a kind of ascent manager that I
Speaker 3: saw in ft Alphavil the other day, Sona Asset Management,
Speaker 3: and they sort of did a very good breakdown of
Speaker 3: private credit and its history and why it's kind of
Speaker 3: running into trouble just now. And I think that the
Speaker 3: begg Is takeaway from it was not so much that
Speaker 3: private credit's going to cause something like two thousand and
Speaker 3: eight or even that is not a valid asset class.
Speaker 3: You know, it will still exist in the future, much
Speaker 3: like junk points still exist. Even alow they did a
Speaker 3: big blow up at the start of their career.
Speaker 2: Just asking for helpe mel John.
Speaker 3: But their point was they're going to go through such
Speaker 3: a long period of poor performance. And I think this
Speaker 3: really gets to why like we don't really or at least
Speaker 3: if it is in your pension funds, you want to
Speaker 3: know about it, and probably ideally you don't want in
Speaker 3: your pension fund because now he's probably not the time
Speaker 3: to be getting into this stuff. And again it's just
Speaker 3: comes back to what we said on the podcast the
Speaker 3: other day. People need to just take responsibility for knowing
Speaker 3: what's in their pension because otherwise, you know, no one
Speaker 3: else is going to do it for you.
Speaker 1: That's going to do it for them at this point. Yeah, okay,
Speaker 1: let's send you something optimistic.
Speaker 3: And the sun's.
Speaker 2: Might be with you.
Speaker 3: See through your window. That's quite right out there.
Speaker 2: Sorry, take it back, sun is shining with me as well.
Speaker 2: That's a bad thing. They've got the sunshining all right, brilliant.
Speaker 1: So just let me say to everybody that if you
Speaker 1: want to know more about the miseries of the UK
Speaker 1: economy and and.
Speaker 2: Some of the things that are great about it and
Speaker 2: reasons to be.
Speaker 1: Optimistic, don't listen to me and John, but do listen
Speaker 1: to our podcast out on Monday with Andy Haldane, because
Speaker 1: he comes up with a lot of things that will
Speaker 1: make you think. But likely this is going to be okay,
Speaker 1: although John, you and I believe that's some major policy
Speaker 1: changes and the UK is in a great place. Without
Speaker 1: those major policy changes, things are going to be tough,
Speaker 1: but there's so much going on underneath all the misery
Speaker 1: that the future could be bright if only we had
Speaker 1: a competent government.
Speaker 2: Thanks for listening to this week's Merrin Talok's Money Debrief.
Speaker 2: If you like, or share, rate, review, and subscribe whereever
Speaker 2: you listen to podcasts.
Speaker 1: Also, if you're sure, to follow me in John on
Speaker 1: ex or Twitter at marinis w and John Undersclotch Stepe.
Speaker 1: This episode was produced by some Mesadi production and support
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Speaker 1: show email is Marin Money at Bloomberg dot net