WEBVTT - Fund Manager Says There’s an Easy Way to Make 3% More 0:00:00.320 --> 0:00:05.680 Hello, John, Hi will now John, inflation right, A lot 0:00:05.720 --> 0:00:09.480 of people have been expecting CPI in the UK to 0:00:09.840 --> 0:00:14.080 fall and fall quite significantly. The whole transient argument is back. 0:00:14.160 --> 0:00:16.800 Oh look, energy prices are falling. Fuel prices are falling. 0:00:16.840 --> 0:00:19.560 Oil prices are falling, and so what we're going to 0:00:19.640 --> 0:00:23.160 see is lower inflation numbers coming through and we kind 0:00:23.160 --> 0:00:25.479 of have it. It's we need tiny bit. But today's 0:00:25.560 --> 0:00:29.000 numbers came in significantly higher than people expected. 0:00:29.080 --> 0:00:32.440 Right, we now have had CPI above ten percent for 0:00:32.720 --> 0:00:35.040 months and months and months. It will take and it 0:00:35.080 --> 0:00:37.640 doesn't seem to be falling back. You've written about this, right, 0:00:37.680 --> 0:00:40.479 what's your explanation? You know what mine is anyway. 0:00:40.560 --> 0:00:43.440 Well, I mean it's just that inflation keeps coming in 0:00:43.560 --> 0:00:47.320 higher than the Bank of England can those wishful thinking 0:00:47.920 --> 0:00:52.520 and makes it makes it harm. I mean in April 0:00:52.760 --> 0:00:56.480 we will see a sharp fall and that will go 0:00:56.640 --> 0:01:02.280 below double digital. It's because effective atithmetically it simply cannot 0:01:03.320 --> 0:01:07.360 The rate it sign now, but it'll probably fall is 0:01:07.400 --> 0:01:10.440 something like seven and a half or eight percent, and 0:01:10.480 --> 0:01:13.080 you know that will sound like a law, but it's 0:01:13.160 --> 0:01:17.119 still higher than the Bank I'd hoped it would be, 0:01:17.240 --> 0:01:21.679 you know, as recently as fair Beauty and it's saying but. 0:01:21.720 --> 0:01:24.319 It's worth reminding everybody that the Bank of England target 0:01:24.520 --> 0:01:29.160 is two percent and an inflation is currently five times 0:01:29.319 --> 0:01:32.800 the Bank of England target. I mean this represents a 0:01:32.840 --> 0:01:37.720 policy fail failure of such stunning scale. I'm amazed for 0:01:37.880 --> 0:01:40.320 not talking about it every single day. We talk a 0:01:40.319 --> 0:01:42.760 lot about the inflation numbers, but how often do you 0:01:42.800 --> 0:01:46.200 hear someone on the radio in the morning saying, wow, 0:01:46.240 --> 0:01:48.680 five times the Bank of England target. Can we get 0:01:48.680 --> 0:01:50.520 someone from the Bank of England on to explain it? 0:01:50.600 --> 0:01:52.800 That's like getting someone from one of the top managers 0:01:52.800 --> 0:01:55.400 of the NHS on to explain the mess up at 0:01:55.400 --> 0:01:57.040 the NHS, right, We never hear from them. 0:01:57.840 --> 0:02:00.760 Well, it's true, and utiliarly talks about it during the 0:02:00.800 --> 0:02:06.640 press conferences after the interest rate meetings either. I mean, 0:02:07.440 --> 0:02:11.119 I think that's interesting in itself because there is that 0:02:11.880 --> 0:02:15.480 sense or that understanding that an awful lot of this 0:02:15.639 --> 0:02:20.520 stuff is beyond the control of central banks. So the 0:02:20.560 --> 0:02:23.600 fact that you set a two percent target doesn't mean 0:02:23.639 --> 0:02:27.280 that you're going to get two percent. And it's almost 0:02:27.400 --> 0:02:30.320 everyone takes that. Yeah, I mean everyone seems to take 0:02:30.360 --> 0:02:33.680 that for granted, to the point where you're not actually 0:02:33.720 --> 0:02:39.400 holding the central bank governor accountable for something that in 0:02:39.520 --> 0:02:42.640 theory he's accountable for. And I mean even has to 0:02:42.680 --> 0:02:46.120 write those stupid little letters to the Chancellor, you know, 0:02:46.160 --> 0:02:48.640 every couple of months saying, oh, you know, I'm sorry 0:02:48.680 --> 0:02:51.480 that inflation is you know, below one percent or above 0:02:51.520 --> 0:02:55.040 three percent. Here's why, it's basically not my fault. 0:02:56.040 --> 0:02:58.320 So what's the point What is the point of the 0:02:58.360 --> 0:03:01.520 Bank of England, What is the point of any central banks? 0:03:01.800 --> 0:03:04.680 You've literally just talked from out of a job? Well, 0:03:04.760 --> 0:03:06.440 I mean, I mean they have one job. 0:03:10.280 --> 0:03:13.360 I don't really think that central banks are necessarily a 0:03:13.360 --> 0:03:17.160 good thing in the first place. I don't know what 0:03:17.280 --> 0:03:22.640 the mechanism is that you would replace them with. But 0:03:22.720 --> 0:03:26.360 you know they're already basically chasing the market the whole 0:03:26.400 --> 0:03:27.080 time anyway. 0:03:27.600 --> 0:03:30.119 Yeah, but it just tells us that we're not quite 0:03:30.160 --> 0:03:32.920 as close to peak rates as we would have expected. Now, listen, 0:03:32.960 --> 0:03:36.200 there's one number that really really stands out in these 0:03:36.280 --> 0:03:38.520 inflation numbers that we've had this week, and that is 0:03:38.560 --> 0:03:46.240 food inflation over nineteen percent, an absolutely extraordinary level of inflation. 0:03:46.680 --> 0:03:51.119 And also, I think we can be pretty certain that 0:03:51.800 --> 0:03:55.040 farmers are not seeing in nineteen percent rise in the 0:03:55.080 --> 0:03:57.800 prices that they're getting. So this is part of this 0:03:57.960 --> 0:04:00.760 new dynamic that we're beginning here a lot about greed inflation, 0:04:01.280 --> 0:04:05.200 where companies are taking the opportunity of crisis and disaster 0:04:05.280 --> 0:04:07.480 to effectively profit here. You know, they did it during 0:04:07.480 --> 0:04:09.720 the pandemic the beginning, at the beginning of the war, 0:04:09.760 --> 0:04:12.840 and they are still doing it. They're shoveling up their 0:04:12.840 --> 0:04:17.240 profit margins to increasing their supernomal levels to take advantage 0:04:17.279 --> 0:04:22.040 of this slightly chaotic period in time. And that seems 0:04:22.080 --> 0:04:25.159 like something that surely can't continue. And if it does continue, 0:04:25.400 --> 0:04:28.640 there would surely be political pressure on the corporate world 0:04:28.760 --> 0:04:29.760 to just stop. 0:04:30.680 --> 0:04:34.520 I mean, you would think particularly food inflation, because food 0:04:34.520 --> 0:04:38.000 inflation is extremely visible. You know, I don't know why 0:04:38.000 --> 0:04:43.240 anyone regardless of you know, can I wealthy or not wealthy, 0:04:43.440 --> 0:04:45.880 who doesn't look at the shopping bell at the moment 0:04:45.880 --> 0:04:48.680 and say, hold dn a minute. You know last week 0:04:48.760 --> 0:04:51.040 that was you know, about ten percent less than it 0:04:51.160 --> 0:04:56.240 is today. So yeah, not that's especially given that you 0:04:56.240 --> 0:04:59.440 know the government has this they dam having the inflationary 0:04:59.720 --> 0:05:02.600 by end of the year. There's quite be some political 0:05:02.640 --> 0:05:04.880 pressure to be out as long as they can find 0:05:06.240 --> 0:05:07.880 a smoking gun for this stuff. 0:05:08.680 --> 0:05:10.240 Well, I mean, this is the sort of time when 0:05:10.279 --> 0:05:13.520 you would expect margins to be falling. You'd be looking 0:05:13.600 --> 0:05:16.080 at the cost pressures, you'd be looking at the pressure 0:05:16.080 --> 0:05:18.239 on consumers at the same time, and you'd be saying, 0:05:18.480 --> 0:05:20.960 this is exactly when you expect the profit cycle to 0:05:21.000 --> 0:05:23.880 turn and margins to be lower, instead of which they're 0:05:23.920 --> 0:05:25.599 going up and up again. 0:05:26.320 --> 0:05:29.520 Well, I mean that's interesting. I mean I know that. 0:05:29.839 --> 0:05:31.640 I mean one reason I think that might be the 0:05:31.680 --> 0:05:33.880 case is simply because I think the consumers are probably 0:05:33.880 --> 0:05:38.159 in better shape than we are given the impression that 0:05:38.200 --> 0:05:40.880 they are. And so that's one reason why this perhaps 0:05:41.000 --> 0:05:43.800 let's push back against these higher prices. Are you a 0:05:43.960 --> 0:05:45.159 cost respect. 0:05:44.880 --> 0:05:47.400 Hang on, are you a cost of living crisis denial? John? 0:05:49.640 --> 0:05:51.919 You know, I know as much denying that there's a 0:05:52.080 --> 0:05:55.640 course of living crisis, But yes, I'm denying the people 0:05:57.000 --> 0:05:59.520 are in the sort of unable to spend. I mean, 0:05:59.520 --> 0:06:04.919 everyone's get jobs, and there are some people are getting 0:06:04.920 --> 0:06:07.400 a certain amount of extra wages, and so far, to 0:06:07.440 --> 0:06:09.080 be fair, they still seem to be able to pay 0:06:09.120 --> 0:06:11.720 their mortgages and things like that as well. I mean, 0:06:11.720 --> 0:06:13.920 it's still a lot of fixtrates to come off this year. 0:06:14.240 --> 0:06:17.400 Something's got to explain how these companies I mean, I mean, 0:06:17.600 --> 0:06:21.039 the supermarket sector in the UK, like the banking sector, 0:06:21.120 --> 0:06:25.600 is pretty competitive, and so if if they're managing to 0:06:25.680 --> 0:06:31.920 push through super super normal profit margin prices, then that 0:06:32.080 --> 0:06:35.320 means that somebody must be sucking it up somewhere, and 0:06:35.360 --> 0:06:38.480 if the consumer is sucking up, it implies that they 0:06:38.520 --> 0:06:41.160 have enough money to do so. Now I'm not I mean, 0:06:41.320 --> 0:06:46.040 I I don't like the idea that people are getting, 0:06:46.320 --> 0:06:48.839 you know, profiteered from due to this kind of confusion, 0:06:48.880 --> 0:06:51.680 and I think that if that's happening, then you know, 0:06:51.760 --> 0:06:54.440 we need to look at it. You know, it's not 0:06:54.480 --> 0:06:56.800 a it's something the politicians should take a week look 0:06:56.839 --> 0:06:58.480 at the fact that it's. 0:06:58.320 --> 0:07:01.240 Even about some price control place controls. 0:07:01.279 --> 0:07:06.920 That's a great idea. Always words, let me. 0:07:06.880 --> 0:07:09.720 Tell you, Let me tell you about rent controls, which 0:07:09.760 --> 0:07:12.280 we now have in Scotland is an Atholte classic of 0:07:12.320 --> 0:07:16.239 the price control genre. And when they first introduced rent 0:07:16.240 --> 0:07:18.960 controls for Scotland last year, I think all of those 0:07:19.040 --> 0:07:22.000 were some vague knowledge of economic history, etc. Again, you know, 0:07:22.040 --> 0:07:24.120 there's been tried a lot of times before in it 0:07:24.280 --> 0:07:28.200 never ever ever works. Because if if the market is 0:07:28.240 --> 0:07:31.720 telling you via high prices that you have maybe too 0:07:31.760 --> 0:07:35.720 much demand or not enough supply or both, you want 0:07:35.720 --> 0:07:39.320 to policy that either reduces demand or increases supply, right, 0:07:39.920 --> 0:07:44.440 and rent controls do exactly the opposite. Make stuff cheaper, 0:07:44.880 --> 0:07:49.520 you increase demand, reduce the return to suppliers, and you 0:07:49.560 --> 0:07:52.600 reduce supply. So you know, that seems obvious and it's 0:07:52.640 --> 0:07:54.840 borne out by many, many case studies. So the Scottish 0:07:54.880 --> 0:07:56.480 did it anyway, I guess. 0:07:56.320 --> 0:07:58.800 What what's harming? 0:07:59.120 --> 0:08:02.240 Well, do you know what, sten This is the one 0:08:02.320 --> 0:08:05.080 time it worked because Scotland is special. Now no, it's 0:08:05.080 --> 0:08:08.640 not working for started suppliers, suppliers falling land laws are 0:08:08.640 --> 0:08:12.880 pulling out, the build to rent suppliers who were just 0:08:12.960 --> 0:08:15.640 beginning to get reasonably big in Scotland are pulling out 0:08:15.760 --> 0:08:19.440 or delaying things. Talking about there was a reporter from 0:08:19.480 --> 0:08:23.160 the British Building Federation in which many of the big 0:08:23.160 --> 0:08:27.080 providers noted that they found Scotland an unattractive place to 0:08:27.160 --> 0:08:30.240 think about investing because of the political risk. And then 0:08:30.280 --> 0:08:35.120 here's a really interesting little dynamic. You can actually see 0:08:35.160 --> 0:08:38.280 what's happening to rents, and despite the fact that they 0:08:38.320 --> 0:08:42.319 have been frozen, they're still going up because every time 0:08:42.520 --> 0:08:45.160 a property comes to the market again, there's a new 0:08:45.280 --> 0:08:48.640 roopdris between tenants. The landlords put up the rent as 0:08:48.720 --> 0:08:51.760 much as they possibly can because they know that their 0:08:52.280 --> 0:08:55.960 future potential to put at rents is limited. So you'll 0:08:55.960 --> 0:08:58.800 see in cities Glasgow, Edinburgh, et cetera, rent's going out 0:08:58.800 --> 0:09:01.520 fourteen to fifteen percent. And of course when we get 0:09:01.520 --> 0:09:03.360 to the beginning available when you can put your rent 0:09:03.440 --> 0:09:06.920 up by three percent, everybody will put their rents up 0:09:06.960 --> 0:09:10.480 by three percent, So the cab becomes a target. Anyway, 0:09:10.880 --> 0:09:14.040 I only tell you about it because absolutely standard stuff 0:09:14.400 --> 0:09:18.720 and mostly mostly the results of policies aren't one hundred 0:09:18.800 --> 0:09:21.960 percent predictable because there are various sort of external forces 0:09:22.000 --> 0:09:24.800 and things can things can turn out differently, but not 0:09:24.880 --> 0:09:27.600 rent controls. Not rent controls. We have so much evidence. 0:09:28.160 --> 0:09:30.880 No, I mean, that's I think that's really interesting because 0:09:31.240 --> 0:09:34.560 for two reasons, like one, actually in areas that aren't 0:09:34.600 --> 0:09:37.080 rent controlled, like you know the rest of the UK, 0:09:37.840 --> 0:09:42.120 it's basically the same dynamic. The landlords aren't generally putting 0:09:42.280 --> 0:09:45.120 rents up for certain tenants because they're just glad they've 0:09:45.120 --> 0:09:48.080 got a certain tenant and one particularly who's low hassle, 0:09:48.400 --> 0:09:50.439 and that's a big deal. You don't really want to 0:09:50.520 --> 0:09:52.960 kick people over a few percent. But as soon as 0:09:52.960 --> 0:09:55.480 people leave, you know, yeah, rents are getting jacked up 0:09:55.480 --> 0:10:00.440 by double digit rates. So the same thing is happening, 0:10:00.520 --> 0:10:03.239 only you don't need to have imposed any event controls. 0:10:03.480 --> 0:10:05.800 And then the thing about the three percent, it's like, 0:10:05.840 --> 0:10:08.600 as you say, it turns from being a cap and 0:10:08.880 --> 0:10:12.280 a target and everyone can raise it at the same 0:10:12.320 --> 0:10:14.880 time because they all know what the target is. And 0:10:14.920 --> 0:10:20.240 so effectively you've kind of created a massive monopoly market 0:10:20.520 --> 0:10:22.840 because now everyone knows that there's not going to be 0:10:22.920 --> 0:10:25.680 anyone undercutting them because everyone's going to raise their rates 0:10:25.679 --> 0:10:28.000 by three percent exactly at the same time. So the 0:10:28.120 --> 0:10:31.560 tenants are a captive market. So I just I just 0:10:31.720 --> 0:10:37.320 wish people would think about the consequences of the policies 0:10:37.360 --> 0:10:39.320 beyond doing something that sounds good. 0:10:39.440 --> 0:10:43.560 It's so. 0:10:45.080 --> 0:10:45.760 Frustrating. 0:10:46.120 --> 0:10:49.720 It's frustrating, But you know what, here's a prediction for you. 0:10:50.640 --> 0:10:53.559 We have decades of history showing as that rent controls 0:10:53.920 --> 0:10:57.240 don't work and effect have negative effects. We have a 0:10:57.480 --> 0:11:01.040 live example, a live case that you can watch in 0:11:01.200 --> 0:11:04.840 real time in Scotland. You can see it failing. You 0:11:04.960 --> 0:11:08.080 can read the failure and the numbers. But I bet 0:11:08.440 --> 0:11:11.000 that the calls for rent controls in the rest of 0:11:11.040 --> 0:11:14.040 the UK and around the world will continue. I know 0:11:14.120 --> 0:11:16.960 that the Sidik can in London has been calling for them. 0:11:17.200 --> 0:11:19.480 You will see more calls for them and you will 0:11:19.600 --> 0:11:22.360 probably get rent controls in more major cities in the 0:11:22.440 --> 0:11:25.160 UK because we are so back to the seventies. 0:11:25.640 --> 0:11:28.120 Oh yeah, I mean Sidik's been calling for them since 0:11:28.240 --> 0:11:30.760 before Scotland even introduced their stuff. So yeah, I mean 0:11:30.800 --> 0:11:35.760 he's not going to change, you mean, I mean, yeah, 0:11:35.840 --> 0:11:38.160 you're good. 0:11:38.480 --> 0:11:41.680 Yeah, but do you know what that tells you landlords? 0:11:42.000 --> 0:11:44.280 And there's messages here, messages I'm going to write about this. 0:11:44.360 --> 0:11:45.760 In fact, I in the middle of writing about this, 0:11:45.800 --> 0:11:48.360 there are messages from Scotland for the rest of the UK. 0:11:49.440 --> 0:11:51.679 All these property bubbles are high price of housing. It 0:11:51.679 --> 0:11:54.360 makes you want to do something, don't do this. And 0:11:54.400 --> 0:11:57.160 then there's a message for landlords the government shouldn't do this, 0:11:57.440 --> 0:11:59.040 but it probably will take action. 0:11:59.559 --> 0:12:01.640 Yeah, I mean, do you do sort of sitting in 0:12:01.720 --> 0:12:04.120 and think, well, look, if I'm a landlord just now 0:12:04.520 --> 0:12:09.040 and I own a properly then on the one hand, yeah, 0:12:09.080 --> 0:12:11.200 maybe I'm going to face a bit of political hassle. 0:12:11.240 --> 0:12:13.840 On the other hand, I'm going to have a semi 0:12:13.920 --> 0:12:16.280 kind of protected market, and much the same way that 0:12:16.840 --> 0:12:18.719 you know, Facebook and all the rest of them call 0:12:18.840 --> 0:12:22.440 for regulations whenever they if they're in the dominant position. 0:12:23.240 --> 0:12:25.199 So I know, I mean, you know, rent controls are 0:12:25.200 --> 0:12:27.120 in a funny kind of way. They do give you 0:12:27.160 --> 0:12:28.680 that if you know you're going to get a nice 0:12:28.679 --> 0:12:31.600 predictable three percent uplift every single year, and then an 0:12:31.600 --> 0:12:34.520 extra you know, twenty twenty percent every time somebody moves out. 0:12:35.200 --> 0:12:37.320 Do you know, maybe it's not such a bad Do 0:12:37.360 --> 0:12:38.520 you know what this has to be? 0:12:38.559 --> 0:12:41.480 In I can introduce you quite a few people in 0:12:41.679 --> 0:12:43.440 Edinburgh who may want to sell you a too big 0:12:43.480 --> 0:12:45.600 or that well told. 0:12:46.720 --> 0:12:48.680 Thanks good, thank you. 0:12:56.240 --> 0:12:59.080 Welcome to Marin Talks Money, the podcasting which people who 0:12:59.160 --> 0:13:02.600 now the market's explain the markets. I'm meren Sunset Web. 0:13:02.880 --> 0:13:06.200 This week's special treat a conversation with Simon Edelson, manager 0:13:06.200 --> 0:13:09.160 of the Artemist Global Select Fund and co manager of 0:13:09.200 --> 0:13:12.640 the Midwind Investment Trust. Actually, before we get any further Samon, 0:13:12.840 --> 0:13:15.160 do you know I call it the Midwind Investment Trust, 0:13:15.160 --> 0:13:18.000 but sometimes I'm tended to call it the Midwind Investment Trust. 0:13:18.320 --> 0:13:20.960 What's the actual real answer, because I hear both all 0:13:20.960 --> 0:13:21.360 the time. 0:13:22.440 --> 0:13:25.040 Well, the last time I was in Dundee, which is 0:13:25.080 --> 0:13:29.120 where Midwind Street is, the locals call it Midwind, So 0:13:29.160 --> 0:13:29.880 I'm sticking with that. 0:13:30.200 --> 0:13:32.640 You're sticking with that, Okay, brilliant. And one of the 0:13:32.679 --> 0:13:34.440 things that I want to mention before we get started 0:13:34.559 --> 0:13:36.880 is that you have a fabulous where record of spending 0:13:36.920 --> 0:13:40.000 long periods in the top quartile, etc. So that you've 0:13:40.000 --> 0:13:42.000 had a very successful career and now you're leaving it. 0:13:42.360 --> 0:13:44.880 You're retiring at the end of the year and handing 0:13:45.000 --> 0:13:47.439 all this over, and we'll talk about the person you're 0:13:47.440 --> 0:13:49.520 handing it over to briefly at the end, so everyone 0:13:49.520 --> 0:13:52.400 knows whether they should sell immediately or hang onto the 0:13:52.440 --> 0:13:54.640 long term. But we'll come to that towards the end 0:13:54.640 --> 0:13:56.920 because Fus, obviously we want to talk about you, so 0:13:57.120 --> 0:13:58.480 thank you for joining us. 0:13:58.920 --> 0:14:00.839 You're welcome to light to be here. 0:14:01.040 --> 0:14:03.400 Good now, I have just been looking, which I didn't 0:14:03.400 --> 0:14:07.360 mean to, actually, I was just googling the performance of 0:14:07.400 --> 0:14:09.559 the Midwind Investment Trust so I can see whether it 0:14:09.720 --> 0:14:11.440 be polite or route to you at the beginning of this, 0:14:11.840 --> 0:14:14.640 and I found an interview that we did a couple 0:14:14.679 --> 0:14:18.720 of years ago, twenty nineteen, and it was very prescient, 0:14:19.320 --> 0:14:23.520 very prescient, all about you had recently been on stage 0:14:23.800 --> 0:14:28.560 with the managers of Scottish Mortgage, and you had been 0:14:28.640 --> 0:14:30.200 We talked a little bit about that because I had 0:14:30.240 --> 0:14:33.400 also recently interviewed the managers of Scottish Mortgage, and we 0:14:33.520 --> 0:14:37.120 talked about the importance of growth and how amazing it 0:14:37.200 --> 0:14:40.760 is to be invested in exciting companies which are disruptive 0:14:40.840 --> 0:14:43.600 and growing at speed and doing brilliant things that will 0:14:43.680 --> 0:14:46.640 lead the world forward, but also about how important it 0:14:46.680 --> 0:14:49.040 is to make sure that you buy those stocks at 0:14:49.080 --> 0:14:52.080 the right price. And you had, I think at the time, 0:14:52.320 --> 0:14:56.040 just sold out of Amazon and a few of those 0:14:56.080 --> 0:14:59.280 sort of similar names, and obviously Scottish Mortgage was hanging 0:14:59.320 --> 0:15:01.440 onto those and you were right. 0:15:02.480 --> 0:15:06.280 Well, yes, we did think that valuations would come under 0:15:06.320 --> 0:15:09.480 pressure a couple of years ago, and so we sold 0:15:09.480 --> 0:15:11.680 a few of our technology shares, which we've made a 0:15:11.800 --> 0:15:14.480 huge amount of money in over the years but we 0:15:14.600 --> 0:15:18.120 just felt that there come points in markets where everyone's 0:15:18.160 --> 0:15:20.920 in the same place, everyone's in the same stocks, everyone's 0:15:20.960 --> 0:15:24.000 pointed in the same direction. Now this doesn't mean these 0:15:24.000 --> 0:15:26.800 companies aren't good. I mean most of them have actually 0:15:26.960 --> 0:15:29.240 performed very well over the last few years, but the 0:15:29.240 --> 0:15:32.880 share prices have gone down because they were priced to perfection, 0:15:33.680 --> 0:15:37.320 and they were priced to perfection also against very very 0:15:37.440 --> 0:15:39.120 artificially low interest rates. 0:15:39.640 --> 0:15:42.880 So we'd had very low interest rates before. 0:15:42.600 --> 0:15:45.800 The pandemic as a result of the financial crisis at 0:15:45.800 --> 0:15:47.520 the end of the two thousands. 0:15:47.640 --> 0:15:50.040 And then those interest rates kept even lower. 0:15:50.120 --> 0:15:52.880 So a lot of what's happened over the last couple 0:15:52.880 --> 0:15:55.880 of years has just been interest rates getting where they 0:15:55.880 --> 0:15:59.560 normally are, inflation getting where it normally is, but quite 0:15:59.600 --> 0:16:02.200 a big all off in the share price of these companies, 0:16:02.680 --> 0:16:05.640 despite those companies still being pretty good businesses. 0:16:06.400 --> 0:16:09.120 What's interesting, isn't it that over this lengthy period of 0:16:09.200 --> 0:16:15.520 falling interest rates and brilliantly performing equity markets, large groups 0:16:15.520 --> 0:16:19.440 of people came to believe that their good performance was 0:16:19.440 --> 0:16:23.080 a result of brilliant stock picking and skill, when in 0:16:23.080 --> 0:16:25.240 fact it was to a large degree a function of that. 0:16:25.280 --> 0:16:26.920 We could come on to central banks in a minute 0:16:26.920 --> 0:16:28.960 actually talking about this kind of thing, whereas in fact 0:16:28.960 --> 0:16:33.640 it was a function of more global global economic dynamics 0:16:33.640 --> 0:16:34.280 and movements. 0:16:34.600 --> 0:16:39.680 I'm afraid that that's always right. My old boss, Neil's Taup, 0:16:39.800 --> 0:16:43.000 who started farm management in nineteen forty six, and I've 0:16:43.040 --> 0:16:45.800 met him when he was about seventy, and one of 0:16:45.800 --> 0:16:48.600 the things he said to me, which always seemed to 0:16:48.640 --> 0:16:50.880 be a joke but now seems to be less of 0:16:50.880 --> 0:16:54.680 a joke, is that as people get wealthier, it turns 0:16:54.720 --> 0:16:57.280 out that they think that they're cleverer than they were. 0:16:57.400 --> 0:16:59.280 I mean, of course, the trouble is that some of 0:16:59.320 --> 0:17:02.000 them were just luck and some of the times we 0:17:02.040 --> 0:17:05.960 live in are easy times to make money. I'm afraid 0:17:06.000 --> 0:17:07.920 the last ten years was an easy time to make 0:17:07.960 --> 0:17:11.359 money until two years ago, and the period we're in 0:17:11.400 --> 0:17:14.080 now is probably going to be a bit more tricky. 0:17:15.000 --> 0:17:19.000 Ask for a bit more certainly, a bit more valuation discipline, 0:17:19.080 --> 0:17:21.639 because suddenly we have the option of leaving money in 0:17:21.680 --> 0:17:24.639 the bank. I mean, you'll lose purchasing power if you 0:17:24.720 --> 0:17:25.720 leave money in the bank, but. 0:17:25.680 --> 0:17:27.200 At least you get more than nothing. 0:17:28.080 --> 0:17:31.080 Well, you saw, I'm sure about the new Apple bank 0:17:31.080 --> 0:17:33.840 account will not quite bank account, but deposit to arrangement 0:17:34.320 --> 0:17:38.560 where you can get four point Indeed, now, why would 0:17:38.560 --> 0:17:41.040 you not do that? And also why would you not? 0:17:41.440 --> 0:17:43.320 Why would you not on your investment account? And of 0:17:43.359 --> 0:17:45.200 course I've done this myself because I had a reasonable 0:17:45.200 --> 0:17:49.320 amount of cash in my investment accounts, which Harger's landsdown, 0:17:49.359 --> 0:17:51.040 except for we're making a large amount of money from 0:17:51.080 --> 0:17:52.959 you by paying me no interest at all. And now 0:17:53.000 --> 0:17:55.800 I've moved a doll landed guilts. So you know, as 0:17:55.840 --> 0:17:58.240 presumably everybody has, and that has consequences, doesn't it. 0:17:59.160 --> 0:18:02.679 Yes, well, well, of course this sort of movement is 0:18:02.720 --> 0:18:05.919 what caused an American bank to fall over, quite a 0:18:05.960 --> 0:18:09.600 small American bank, but all the same, bank failures don't 0:18:09.600 --> 0:18:12.479 come along all that often, and when they do come along, 0:18:13.160 --> 0:18:16.040 one ought to pay attention to them. So this American 0:18:16.080 --> 0:18:20.040 bank called Silicon Valley Bank. He got a couple of 0:18:20.040 --> 0:18:24.000 things wrong, including having a city name, But the main 0:18:24.080 --> 0:18:27.040 thing was the main thing was that the people who 0:18:27.119 --> 0:18:30.480 left the deposits there were all quite switched on and 0:18:30.520 --> 0:18:32.720 all quite plugged in, and so it only took them 0:18:33.359 --> 0:18:35.560 a very short period of time to move their. 0:18:35.440 --> 0:18:37.359 Money out of that bank. 0:18:37.680 --> 0:18:42.080 Into money market funds and the equivalent of US treasuries 0:18:42.080 --> 0:18:44.440 where they have better security and a high yield. I mean, 0:18:44.440 --> 0:18:48.160 what's not to like. A friend of mine was heady 0:18:48.240 --> 0:18:52.040 skiing in Canada and saw some of the largest depositors 0:18:52.040 --> 0:18:56.160 doing it, moving this money on their iPhones that Friday night. 0:18:56.320 --> 0:18:58.919 So I mean, we live in a world where the 0:18:59.000 --> 0:19:03.000 frigidities in the system that rudely exposed from time to time, 0:19:03.359 --> 0:19:05.639 and everyone says, well. 0:19:05.640 --> 0:19:07.840 Similar things won't happen around the rest of the world. 0:19:07.920 --> 0:19:11.000 And certainly, you know, the credit suitel issues are more 0:19:11.080 --> 0:19:14.480 down bad management than deposits moving around. But if you're 0:19:14.560 --> 0:19:16.560 moving your deposits, and I have to say, I've been 0:19:16.600 --> 0:19:19.280 moving my deposits as well, and I move and I 0:19:19.359 --> 0:19:21.840 check my interest s right on the small cash balances 0:19:21.880 --> 0:19:24.720 we have on the funds to make sure that you're 0:19:24.720 --> 0:19:26.919 getting at least at least three and a half percent 0:19:27.000 --> 0:19:29.160 in the UK at the moment, and I'm afraid most 0:19:29.160 --> 0:19:32.840 people aren't. So that's tip number one, but it is 0:19:32.880 --> 0:19:34.719 it check your deposit account. 0:19:34.800 --> 0:19:35.720 I could see that one. 0:19:36.040 --> 0:19:38.320 That is possibly the most important. I mean, I know 0:19:38.359 --> 0:19:40.600 you're going to say, piles more interesting things as we 0:19:40.680 --> 0:19:42.800 go on over the next half an hour. But I 0:19:42.920 --> 0:19:45.080 have to say I believe that this is the most 0:19:45.080 --> 0:19:47.920 important financial advice you can give anyone in the UK 0:19:48.000 --> 0:19:50.320 at the moment. If you look at your deposit account, 0:19:50.520 --> 0:19:52.960 I bet you will find that you're still making one percent, 0:19:53.040 --> 0:19:56.159 one and a half percent, possibly significantly less, and you 0:19:56.200 --> 0:19:59.120 can move that money and make a risk free two 0:19:59.200 --> 0:20:02.399 or three percent points more in a matter of minutes. 0:20:02.440 --> 0:20:03.840 Well I don't know how many minutes it takes to 0:20:03.880 --> 0:20:05.520 open and your bank account these days, but not very 0:20:05.560 --> 0:20:07.320 many minutes. And you could do that even as I 0:20:07.320 --> 0:20:09.280 say in your investment catch, just by buying short, short 0:20:09.359 --> 0:20:12.680 dated guilts. So if you haven't done that, you're literally 0:20:12.720 --> 0:20:15.320 throwing money away. You're giving it to the big financial 0:20:15.359 --> 0:20:17.880 institutions who you will always tell me that you hate 0:20:18.200 --> 0:20:20.360 every time I talk to the little to hate their bank. Well, 0:20:20.359 --> 0:20:23.160 you know what, you can take your revenge now, This 0:20:23.200 --> 0:20:25.080 is the time to take your revenge on the retail 0:20:25.119 --> 0:20:26.679 banks that you just like so much. Go for it, 0:20:26.760 --> 0:20:28.440 do it. They may all go bust as a result, 0:20:28.480 --> 0:20:31.840 but you know whatever, do it anyway, Do it anyway, right, Simon, 0:20:31.920 --> 0:20:34.680 Let's stick with interest rates and inflation, because this is 0:20:34.880 --> 0:20:36.360 the key dynamic in markets. 0:20:36.440 --> 0:20:36.600 Right. 0:20:36.840 --> 0:20:38.920 You said a few minutes ago that we're getting to 0:20:38.920 --> 0:20:41.720 the point where interest rates are normalizing and inflation rates 0:20:41.720 --> 0:20:44.119 are normalizing. They're coming back to where they should be. 0:20:44.520 --> 0:20:48.200 Now that I agree with you. But if you move 0:20:48.320 --> 0:20:53.040 interest rates from the lowest they've been ever back to 0:20:53.280 --> 0:20:55.480