WEBVTT - MTM_ROUNDUP_100726_V1

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>Welcome to the Merlin Talks Money Market rapp where we

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<v Speaker 2>talk about the biggest moves in Marcus this week and

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<v Speaker 2>was driving them. I'm joined Stepics, senior report and author

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<v Speaker 2>of the award winning Money Distilled newsletter, and joining me

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<v Speaker 2>while Merrin is out is Morewene conyum more whenas co

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<v Speaker 2>editor of the Bloomberg Markets Today blog in London and

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<v Speaker 2>writes about UK assets, economics and markets more generally. Moreena,

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<v Speaker 2>thank you so much for joining us again, thank you

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<v Speaker 2>having me well Whenna, thanks for joining me. Now we're

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<v Speaker 2>recording this in the morning the July eighth Wednesday, so

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<v Speaker 2>we tell you listen to this. Things may have changed,

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<v Speaker 2>but hopefully the themes that we discuss are fairly long running.

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<v Speaker 2>So today we're going to talk about the on again,

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<v Speaker 2>off again Seize finan I ran, the EA bubble has

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<v Speaker 2>bossed thanks to Admitter's CEO, and what all of this

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<v Speaker 2>means for UK markets and your money. The cease fire

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<v Speaker 2>has been on again and then off again, and at

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<v Speaker 2>the moment it's off again. I'm sure that we may

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<v Speaker 2>see fluctuations in that status over the common days, but

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<v Speaker 2>for no, that's certainly. Can I put the wend up

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<v Speaker 2>the market a bit?

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<v Speaker 1>It has.

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<v Speaker 3>We've seen quite a big escalation in bond yields thanks

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<v Speaker 3>to oil price spike following comments from US President Donald

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<v Speaker 3>Trump as far as he is concerncyes fires over. Of course,

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<v Speaker 3>there may well be a lot of further developments on

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<v Speaker 3>that topic.

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<v Speaker 1>But we are seeing some.

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<v Speaker 3>Of the bond rally, you know, really pulling back. Bonds

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<v Speaker 3>are falling in Europe and particularly the UK as those

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<v Speaker 3>inflation concerns start to creep back into people's minds, and

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<v Speaker 3>we're seeing that in central bank bets as well. Those

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<v Speaker 3>hiking bets are being added to. Today, still only pricing

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<v Speaker 3>in at the moment one hike from the Bank of

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<v Speaker 3>England this year, but there's about one in three chances

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<v Speaker 3>now that there might be a second one, and it's

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<v Speaker 3>up quite considerably from where we were earlier in the week.

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<v Speaker 3>So at the moment that's the trajectory. But I think

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<v Speaker 3>what it really shows is that there is still a

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<v Speaker 3>lot of volatility and a lot of uncertainty, and i'd

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<v Speaker 3>say for the last month or so, the market has

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<v Speaker 3>started to be pricing in a degree of stability, thinking

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<v Speaker 3>this ceasefire is going to hold and that the second

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<v Speaker 3>half of the year would be one of lower oil

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<v Speaker 3>prices and improven We're still not back where we were,

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<v Speaker 3>but I think it thinks they are a lot less

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<v Speaker 3>settled than perhaps had started to be deemed the case.

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<v Speaker 2>It's interesting because, I mean, I think the thing that's

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<v Speaker 2>always struck me, struck me since this began is that

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<v Speaker 2>on the wine hidh and it's not always it's not

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<v Speaker 2>a good idea to second guess the market, but at

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<v Speaker 2>the same time, the level of complacency and sort of

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<v Speaker 2>faith that this would all kind of come out in

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<v Speaker 2>the wash. I mean, the fact that oil prices were

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<v Speaker 2>down to where they were at the start at it's

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<v Speaker 2>conflict back at the end of February. I mean, I'm

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<v Speaker 2>sure that this is just another phase in the ongoing

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<v Speaker 2>kind of saga, and it will be all sunching and

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<v Speaker 2>roses again at some point. But I guess it's this

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<v Speaker 2>point about how markets really haven't considered the potential downside here,

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<v Speaker 2>although maybe getting a bit too comfortable with the idea

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<v Speaker 2>that it was all going to be okay, and hence

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<v Speaker 2>they kind of slightly kind of the big reaction to

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<v Speaker 2>today at it not being it's actually not all over.

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<v Speaker 3>Yeah, absolutely, I mean I think there's perhaps an element

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<v Speaker 3>of complacency, as you say, I think there was also

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<v Speaker 3>an element of the we've had a few weeks of

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<v Speaker 3>things seeing seeming steadier, but that followed, you know, months

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<v Speaker 3>of quite extreme volatility with quite big swings on every comment,

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<v Speaker 3>and actually that those moves got smaller, and whilst we

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<v Speaker 3>have seen a sizeable reaction today, it's nothing compared to

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<v Speaker 3>at the beginning of the war. So I think markets

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<v Speaker 3>they've permanently priced in a certain degree of volatility now,

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<v Speaker 3>but very interesting to see. I think where we go

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<v Speaker 3>from here now that uncertainty question is back in there

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<v Speaker 3>and in other areas of markets of course, so we

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<v Speaker 3>are seeing bigger fundamental shifts which are also impacting some

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<v Speaker 3>of the moves. So inequities that we're seeing beyond the

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<v Speaker 3>sort of or again off again Iran wre situation.

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<v Speaker 2>Well, because this is also the EI bubble story, seems

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<v Speaker 2>to be a know up Elsie can't time these things,

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<v Speaker 2>is they had to tell there does seem to have

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<v Speaker 2>been a bit of a sentiment tipping point. I mean,

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<v Speaker 2>I don't know what you think, but I think meta,

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<v Speaker 2>So like the Facebook boss last week coming out and

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<v Speaker 2>saying effectively that are not even to be fair, they

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<v Speaker 2>hinted at it. They said, Okay, so we're building all

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<v Speaker 2>this capacity in order to create an AI, but actually

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<v Speaker 2>we might end up just renting it out to other

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<v Speaker 2>people because you know, that'll make us some money in

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<v Speaker 2>the meantime. And you get the sense that markets took

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<v Speaker 2>that to mean, way, I'm in it, you know, because

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<v Speaker 2>the thing the bow gay Man everyone's waiting for is

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<v Speaker 2>we've built too much of this stuff and now we

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<v Speaker 2>need to monetize it. And if Meta are turned around

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<v Speaker 2>already and saying, okay, we're building all this stuff, but

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<v Speaker 2>effectively we're not going to need it, so we rented

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<v Speaker 2>to someone else. I think it's sort of like appears

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<v Speaker 2>to have made people in the market think twice about

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<v Speaker 2>their exposure to semiconductors and chipman you factor of us,

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<v Speaker 2>I mean, Jane, and that is kind of sort of

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<v Speaker 2>fear somebody.

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<v Speaker 3>Yeah. I think there's definitely been a bit of a

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<v Speaker 3>reassessment and people looking along with supply chain. So where

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<v Speaker 3>we'd seen a lot of the focus those high growth

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<v Speaker 3>sort of chip making stocks, the data centers that has

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<v Speaker 3>been on such a long rally. I think the question

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<v Speaker 3>was always how far can this go? And maybe we're

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<v Speaker 3>starting to get a bit of that answer. We still

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<v Speaker 3>have days of rallies, but we are increasingly seeing the

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<v Speaker 3>sort of reversal. We're seeing a pivot in trading patterns

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<v Speaker 3>and people looking for value elsewhere. So it's still in

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<v Speaker 3>the tech space, but who stands to benefit from other

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<v Speaker 3>parts of the AI trade and some of the sort

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<v Speaker 3>of more traditional tech companies even you know, seeing Ali

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<v Speaker 3>barbars oring in China rather than Samsung, and we are

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<v Speaker 3>seeing a shift, I think, and whether that's going to

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<v Speaker 3>continue in a linear fashion or we're going to see

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<v Speaker 3>a bit of back and forth. But I do think

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<v Speaker 3>there's definitely been rotation starting and some sentiment changing, and

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<v Speaker 3>that is obviously weighing on global equities because it's been

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<v Speaker 3>where so much.

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<v Speaker 1>Of the power has been.

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<v Speaker 3>There are pockets which can be resilient to that, and

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<v Speaker 3>that the UK is one of them.

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<v Speaker 1>We don't have much exposure to tech.

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<v Speaker 3>We've been missing out quite a lot, but on days

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<v Speaker 3>where you see still off. In fact, the last two

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<v Speaker 3>days one of the worst performing sectors in Europe has

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<v Speaker 3>been technology and the UK, particularly the foots one hundred

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<v Speaker 3>is only very slightly exposed to that with some sort

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<v Speaker 3>of funds, meaning that even if it falls with the

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<v Speaker 3>global broader sentiment, it's actually been outperforming peers.

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<v Speaker 1>It's also, of course supported.

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<v Speaker 3>By some fairly heavy weight oil stocks like BP and Shell,

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<v Speaker 3>so the Iran conflict escalation or potential escalation certainly plays

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<v Speaker 3>into its hands as well there. But it's certainly a

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<v Speaker 3>time i'd say, where people would be wanting to look

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<v Speaker 3>at diversifying, and diversifying is paying off and not having

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<v Speaker 3>all of your eggs in one very specific type of

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<v Speaker 3>tech basket.

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<v Speaker 2>Yeah, arguably, I guess in this context, the Yuki is

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<v Speaker 2>a defensive market. Whereas you know, if you're looking for

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<v Speaker 2>something to opposite your your South Korean costs exposure, which

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<v Speaker 2>has been up and down like a yo yo, because

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<v Speaker 2>it's basically two stocks, I guess kind of the UK

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<v Speaker 2>looks more appealing to people. The other big thing this

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<v Speaker 2>week was the bed for easy Jet, which is obviously

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<v Speaker 2>a big name consumer brand, you know, even if it's

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<v Speaker 2>not the largest company and the food see so a

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<v Speaker 2>private equity company that's come along and decided that bed

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<v Speaker 2>for this and it seems to be going through and

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<v Speaker 2>I guess the question is is it going to be

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<v Speaker 2>a point at which, you know, this sale off of

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<v Speaker 2>the UK as a whole kind of comes to some

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<v Speaker 2>sort of end, or we're going to see the IPO

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<v Speaker 2>pipeline pick up. Because someone actually put it very well

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<v Speaker 2>on the Ft the it's a ratio of twenty seven

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<v Speaker 2>to one in terms of the value of stuff vanation

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<v Speaker 2>from the market and the value of things coming in

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<v Speaker 2>to replace it are then hence I so I was

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<v Speaker 2>reading that perhaps in the next six months, in the

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<v Speaker 2>second half of the year, as long as there's a

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<v Speaker 2>bit less volatility, we make it a few more additions,

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<v Speaker 2>you know, in the IPO pipeline. But I guess if

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<v Speaker 2>if what we're seeing right now continues, that make it

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<v Speaker 2>pushed back yet again.

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<v Speaker 1>Yeah.

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<v Speaker 3>I mean, there are a couple of companies that have

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<v Speaker 3>been discussed as potentially IPA can that I think Virgin

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<v Speaker 3>Active was one of them. But overall, you know, we've

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<v Speaker 3>seen two trends. One is UK companies being acquired because

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<v Speaker 3>to our point about the foots generally underperforming in a way,

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<v Speaker 3>they are so much cheaper, so they are seen as

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<v Speaker 3>good value when they're very attractive to overseas buyers. Unfortunately,

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<v Speaker 3>that also means that when companies are looking at where

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<v Speaker 3>which market they're going to list in, they potentially see

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<v Speaker 3>more potential gains from listing in the US. And I think,

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<v Speaker 3>you know, when you look at actual performance, that can

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<v Speaker 3>vary because you can certainly be a bigfish in a

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<v Speaker 3>small pond, or you can potentially be overlooked. But there's

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<v Speaker 3>a lot more investor activity. One interesting thing I think

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<v Speaker 3>it was last week was Robin Hood CEO was talking

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<v Speaker 3>about trying to get people in the UK.

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<v Speaker 1>It's a retail.

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<v Speaker 3>Investment more and you know that could help potentially if

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<v Speaker 3>there's more of an investment culture in the UK. At

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<v Speaker 3>the moment, UK companies aren't even owned predominantly, you know,

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<v Speaker 3>by UK holders, So I don't think we're going to

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<v Speaker 3>see a massive shift in that.

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<v Speaker 1>But of course, if we see a.

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<v Speaker 3>Fundamental change in evaluation ratios, then we might see less

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<v Speaker 3>M and A and more listings here.

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<v Speaker 2>Yeah, I mean I suppose that's the thing, because I mean,

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<v Speaker 2>the Robin Hood thing is interesting because the FCA has

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<v Speaker 2>relaxed the rules about financial advice so in order to

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<v Speaker 2>make it more feasible to give beginner investors the kind

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<v Speaker 2>of very basic stuff that you know, people in this office,

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<v Speaker 2>you know, personal financial others right about all the time.

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<v Speaker 2>But the companies themselves are not allowed to see that

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<v Speaker 2>to people because it's sort of like it has been

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<v Speaker 2>deemed as being too much like personal advice by the

0:11:49.880 --> 0:11:52.280
<v Speaker 2>regulatory regime. But that is getting to relax. So we

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<v Speaker 2>interesting to see if that can put a dent in

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<v Speaker 2>the kind of UK investors kind of you know locked,

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<v Speaker 2>and to see if a law I still think tax

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<v Speaker 2>stuff with body help.

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<v Speaker 3>It was about I was about to say it is

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<v Speaker 3>a lot easier well certainly taxation wise to buy foreign

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<v Speaker 3>docks to the UK stock markets detriment you know, things

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<v Speaker 3>like capital gain sacks do. That's been something that's been

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<v Speaker 3>discussed and I think that will probably continue to be

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<v Speaker 3>in the conversation. If the government, whoever is leading it,

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<v Speaker 3>want to continue this push to make us a nation

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<v Speaker 3>of investors not just savers, that there's going to have

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<v Speaker 3>to be some more sort of attractive incentives. So certainly

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<v Speaker 3>people don't want to feel financially penalized for investing in

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<v Speaker 3>UK companies instead of foreign wants.

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<v Speaker 2>Yeah, can they get the distant duty. But there is

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<v Speaker 2>one osade we were discussing just before you came on

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<v Speaker 2>to the coincident and the activity from outsied in the UK,

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<v Speaker 2>and that's that it may be responsible for the pond

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<v Speaker 2>being surprisingly strong this year.

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<v Speaker 3>It has been suggested that it's at least helping. The

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<v Speaker 3>pound is actually I was just checking that the third

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<v Speaker 3>best performing major currency so far this year, which is

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<v Speaker 3>quite surprising when you consider that the dollar has benefited

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<v Speaker 3>from the US Iran war, which would normally weigh heavily

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<v Speaker 3>than the pound. It's weighed on all peers. But also

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<v Speaker 3>we've had this sort of domestic political turmoil. I mean,

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<v Speaker 3>our Prime minister has just resigned. As yet the successor

0:13:32.880 --> 0:13:36.800
<v Speaker 3>is not absolutely set in stone and what they will

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<v Speaker 3>do is quite largely unknown, which when you look back

0:13:41.720 --> 0:13:44.200
<v Speaker 3>over the last few years at how the pound has

0:13:44.840 --> 0:13:49.600
<v Speaker 3>suffered as a result of economic uncertainty, concerns about what

0:13:49.679 --> 0:13:51.720
<v Speaker 3>Rachel Reaves was going to do, even though she set

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<v Speaker 3>out her plans, it's quite surprising that it's been unbelievably unruffled.

0:13:59.440 --> 0:14:01.640
<v Speaker 3>One of the suggestions is actually that there's a lot

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<v Speaker 3>of inflows as a result of foreign companies investing in

0:14:07.240 --> 0:14:13.160
<v Speaker 3>UK assets, particularly company takeovers. They're both attractive for that,

0:14:13.160 --> 0:14:15.120
<v Speaker 3>but it is supposive of the currency too.

0:14:15.960 --> 0:14:18.800
<v Speaker 2>Okay, so if we get the stock market working again,

0:14:18.880 --> 0:14:21.000
<v Speaker 2>we may have to contend with a week er pound. Okay,

0:14:21.000 --> 0:14:22.600
<v Speaker 2>I think I think that's a price that I'm willing

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<v Speaker 2>to pay. Thanks very much more when I really appreciate

0:14:25.360 --> 0:14:32.120
<v Speaker 2>your time. As always, thank you, thanks for listening. This

0:14:32.120 --> 0:14:34.800
<v Speaker 2>week's Marlton Talks Money Markets Wrap. If you like a show,

0:14:34.920 --> 0:14:36.520
<v Speaker 2>rate the view and subscribe. But if you listen to

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<v Speaker 2>podcasts and be sure to follow me and Marren on

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<v Speaker 2>x Man's at merin sw and join Underscore Stepic. The

0:14:44.480 --> 0:14:47.560
<v Speaker 2>episode was produced by Summer, Sadi and Moses and questions

0:14:47.560 --> 0:14:49.760
<v Speaker 2>and comments on the show and all our shows are

0:14:49.760 --> 0:14:52.320
<v Speaker 2>always welcome. Our show email it is Melon Money at

0:14:52.320 --> 0:14:55.240
<v Speaker 2>Bloomberg dot Net. A special thanks to more when at

0:14:55.280 --> 0:14:55.640
<v Speaker 2>Conium