Latest / Merryn Talks Money / UK Housing Jitters, Market Moves, and "Psychic Wealth"

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UK Housing Jitters, Market Moves, and "Psychic Wealth" · Merryn Talks Money

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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. So Merrin Talks Money listeners,
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Speaker 1: or at the very least the London based ones, Have
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Speaker 1: you actually done it? Have you signed up to join
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Speaker 1: us at Bloomberg's European headquarters in the heart of the
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Speaker 1: city on November twenty seventh, we will be taping an
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Speaker 1: episode of the podcast in front of a live audience
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Speaker 1: the morning after the UK budget. I will be joined
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Speaker 1: by Helen Thomas of Blonde Money, Stephanie Flanders, Bloomberg's head
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Speaker 1: of Government and Economics, and of course John Steppek will
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Speaker 1: also be there. So if you haven't signed up yet,
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Speaker 1: find the registration link in the show notes and do
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Speaker 1: join us.
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Speaker 2: We hope to see you there. There will be coffee,
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Speaker 2: There will be croissants. Onto the episode.
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Speaker 1: Welcome to the Merrin Talks Money Market Wrap, while we
0:55
Speaker 1: talk about the biggest moves in the market this week
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Speaker 1: and what is driving them. I'm Maren zumset webeditor, a
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Speaker 1: large for Bloomberg UK Wealth.
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Speaker 3: And I'm Joined Stebic, senior reporter noted at the Money
1:04
Speaker 3: Distilled newsletter.
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Speaker 2: Excellent.
1:09
Speaker 1: Hi John, Hi Ma, Now listen I know that I
1:13
Speaker 1: mean you know it'd be nice to have a little
1:15
Speaker 1: casual chat right now, but there's literally no point because
1:17
Speaker 1: all you can think about is the housing market. Yeah,
1:20
Speaker 1: as regular listeners will know, John is absolutely obsessed with
1:23
Speaker 1: house prices in the UK and the latest Rick survey
1:26
Speaker 1: is just Christian's mill.
1:28
Speaker 3: It's just fascinating stuff. Well, I say, I suppose it's
1:32
Speaker 3: not that fascinating. There's an awful lot obviously, the agents
1:36
Speaker 3: saying that the nervous and the buyers and nerves ahead
1:40
Speaker 3: of the budget that people are putting off sales, they
1:43
Speaker 3: are putting off buy in. There a little bit gloomy
1:46
Speaker 3: about how things are going to go over the next
1:48
Speaker 3: three months, but they're not that gloomy, and basically all
1:51
Speaker 3: points to prices being kind of flat to lower, assuming
1:56
Speaker 3: that the budget goes broadly according to plan. That's just
2:00
Speaker 3: quite a big assumption. But the one thing I would
2:03
Speaker 3: say is, and I think it is probably more important
2:06
Speaker 3: than any of this stuff, is the fact that interest
2:08
Speaker 3: rates have been steadily dripping lower and mortgage rates have
2:12
Speaker 3: been steadily dripping lower. And the one thing that you
2:14
Speaker 3: and I know from years and years of better experience
2:17
Speaker 3: is that really house prices are driven by one thing
2:20
Speaker 3: and that's the price that somebody can get a mortgage for.
2:22
Speaker 3: And the reason that they've been flag to fall in
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Speaker 3: for the last three years is because mortgage rates obviously
2:28
Speaker 3: shot up with interest rates and now that they're kind
2:31
Speaker 3: of just ever so slightly dropping lower because markets now
2:34
Speaker 3: expect the Bank of England to have to cut interest
2:37
Speaker 3: rates more. I suspect that we might see house prices
2:40
Speaker 3: not go up a lot, but can of move away
2:44
Speaker 3: from the flat line maybe in the next six months.
2:47
Speaker 1: Yeah, I mean that's an interesting point, John, And you're right.
2:49
Speaker 1: We always say that the price of a house is
2:51
Speaker 1: about the price of money, but it's also about some
2:54
Speaker 1: of the uncertainties. At the moment, we're in this hopefully
2:57
Speaker 1: short term situation of huge economic uncert you and concern
3:00
Speaker 1: about what taxes might come up in the budget, and
3:02
Speaker 1: there's lots of concern about new property taxes, new wealth taxes,
3:06
Speaker 1: changes to the council tax regime, etc. And an awful
3:09
Speaker 1: lot of people feel very uncertain about buying house at
3:12
Speaker 1: all level and paying over the asking price by any
3:15
Speaker 1: means for a house in this kind of environment.
3:18
Speaker 3: Right, Oh, yeah, absolutely, I think to be feeling that
3:21
Speaker 3: mostly affects people at the wealthier end of the spectrum. Yeah,
3:26
Speaker 3: mainly because you know, they're the ones who will be
3:29
Speaker 3: sitting there going very well, if I put this off,
3:33
Speaker 3: I'm going to be able to see how hard she's
3:35
Speaker 3: going to hit me and whether I actually want to
3:37
Speaker 3: go ahead with this or not. I mean, it's kind
3:39
Speaker 3: of slightly different if you're moving you know, maybe under
3:42
Speaker 3: a half a million pounds or under three quarters of
3:44
Speaker 3: a million pounds, if you're in London and it's just well, look,
3:47
Speaker 3: you just get to get on with life.
3:50
Speaker 1: You know.
3:50
Speaker 3: It's not like you can leave the country if you
3:52
Speaker 3: don't like what Rachel Reeves does. It's not like you've
3:54
Speaker 3: gotten an awful lot of evasive action things that you
3:57
Speaker 3: can do. So I think at that end of the
3:59
Speaker 3: market it probably doesn't actually have that much effect. It's
4:02
Speaker 3: just a useful, you know, conversation piece for the stagents
4:05
Speaker 3: to talk about, but definitely the high end.
4:07
Speaker 1: The other thing I think it's useful to point out
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Speaker 1: is that even if house prices over the full year
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Speaker 1: do reach that reach the level that most analysts are
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Speaker 1: forecusting and say, you know, two and a half three
4:17
Speaker 1: percent growth over the year, we're still looking at things
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Speaker 1: being flat and inflation adjusted terms at best, and in fact,
4:24
Speaker 1: house prices have full and quite a lot in inflation
4:26
Speaker 1: adjusted terms over the last few years.
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Speaker 3: Yeah, and that's actually I find this really interesting because
4:34
Speaker 3: when you think about how buoyant things like equities and
4:38
Speaker 3: gold have been, the fact that house prices have probably
4:44
Speaker 3: for one of the first times in my career, have
4:47
Speaker 3: been the least interesting asset market for a prolonged period
4:51
Speaker 3: of time now and to the point where people are
4:54
Speaker 3: actually sort of getting the message. There was a very
4:56
Speaker 3: good piece posted out on LinkedIn yesterday from a chart
5:00
Speaker 3: who was talking about how he'd bought a flat in
5:01
Speaker 3: twenty sixteen and rented it out, and he was basically
5:04
Speaker 3: explaining how over that whole time, with the changes to
5:08
Speaker 3: the taxation and buy to let it and also with
5:12
Speaker 3: the fact that capital gains have gone nowhere because this
5:16
Speaker 3: was in London, so it's been about flat for ten
5:18
Speaker 3: years in London. He'd walked out that he'd been paid
5:21
Speaker 3: less than minimum wage for all the work he'd done
5:24
Speaker 3: running this side business as a kind of amateur landlord,
5:27
Speaker 3: and he basically said that there was a complete waste
5:28
Speaker 3: of my time. I should have sold it and put
5:30
Speaker 3: all the money into equities. And I haven't heard much
5:33
Speaker 3: stuff like that, even though it's probably been true for
5:36
Speaker 3: at least kind of five or six years now. So
5:38
Speaker 3: it's really interesting that I think people are starting to
5:41
Speaker 3: get out of the mindset of you can't go wrong
5:43
Speaker 3: with bricks and watar.
5:45
Speaker 1: Yeah, I mean, this is it's interesting, isn't it, Because
5:48
Speaker 1: it used to be that there was so many problems
5:52
Speaker 1: with buy to letting. We got to the point where
5:54
Speaker 1: we remember us making various calculations showing that the average
5:57
Speaker 1: by to let invest it was actually cash negative on
6:00
Speaker 1: average months, but nobody cared because if they were making
6:04
Speaker 1: great capital gains, it was still absolutely worth it. Yeah,
6:09
Speaker 1: but if you're not making capital gain, suddenly it turns
6:11
Speaker 1: into a bit of a nightmare.
6:12
Speaker 3: Yeah, And it is that. I do think it's also
6:14
Speaker 3: that thing I thought it was really sensible. The guy
6:17
Speaker 3: made the point, you know, I'm actually having any managed
6:20
Speaker 3: this so like where it's like my equity portfolio and
6:22
Speaker 3: never phones me up and says the toilet's broken. You
6:25
Speaker 3: know that happens, you know what I mean, It's like
6:29
Speaker 3: it's a all mazing kind of business running an equity portfolio,
6:33
Speaker 3: whereas yeah, you know, you're kind of taking up your
6:35
Speaker 3: weekends and you just spare time stressing about things. You
6:38
Speaker 3: want to get compensated for that as well, So even
6:41
Speaker 3: if you are managing to make some money, it's going
6:44
Speaker 3: to be worth your real money. Yeah, so I thought
6:48
Speaker 3: that was really interesting.
6:50
Speaker 1: It is interesting, Okay, So moving away from that and
6:53
Speaker 1: the idea that they may finally be the beginning of
6:56
Speaker 1: a change of mindset about property prices in the UK,
6:58
Speaker 1: about you know, my property is my pension and all
7:00
Speaker 1: that kind of thing that we've written about a lot
7:02
Speaker 1: over the years. We are suddenly seeing, despite the appalling
7:06
Speaker 1: political shenanigans in the UK and the miserable state of
7:10
Speaker 1: the UK economy growth coming in at almost nothing almost
7:14
Speaker 1: nothing in the last quarter, we're still seeing the equity
7:18
Speaker 1: market doing rather well and it's kind of exciting.
7:20
Speaker 3: We have this idea that quite soon we'll go through
7:21
Speaker 3: ten thousand, right, Oh, that would be great. I hope.
7:24
Speaker 3: I mean, I can see the seeding. It's usual and
7:26
Speaker 3: just like really horribly teasing us all as it has
7:29
Speaker 3: been doing this week. But yeah, it's just no reason
7:32
Speaker 3: why you shouldn't get to the big number of ten
7:35
Speaker 3: thousand at some point before Christmas, assuming you know, the
7:40
Speaker 3: American EA bubble doesn't pop before then it is ruined
7:43
Speaker 3: efflent on everyone, which, by the.
7:45
Speaker 1: Way, we should we should say, by the way, that
7:48
Speaker 1: this still leaves the foot seat very significantly down from
7:52
Speaker 1: its peak and inflation adjusted terms, So you know, ten
7:55
Speaker 1: thousand might feel nice, but you will still be down
7:58
Speaker 1: in real terms.
8:00
Speaker 3: Oh, that's such a spoil sport. That's the one law.
8:05
Speaker 3: It depends on when you pop. Just it.
8:07
Speaker 2: Okay, all right, all right, mister optimistic. Just like.
8:15
Speaker 1: Round numbers are exciting, but they don't tell you the
8:18
Speaker 1: whole truth. And we should mention, by the way, while
8:20
Speaker 1: we're talking about the footy one hundred, that three I
8:23
Speaker 1: group has had a bit of a nasty day. We're
8:25
Speaker 1: talking on the day when its results came out and
8:27
Speaker 1: it fell I think at one point down set of
8:29
Speaker 1: fifteen percent or so.
8:31
Speaker 3: And that's.
8:33
Speaker 1: I think partly because people are suddenly noticing the extent
8:36
Speaker 1: to which is dependent on one company. So it's got
8:40
Speaker 1: an awful lot of the portfolios of seventy percent of
8:43
Speaker 1: it's a total asset value in a Dutch retailer, so
8:46
Speaker 1: it makes it at the very top heavy, and it's
8:48
Speaker 1: also trading it at a premium to it's navy, So
8:51
Speaker 1: there are various things to worry about with that, But
8:53
Speaker 1: I think a lot of people probably have it in
8:55
Speaker 1: their portfolios. Just it heads up that just because the
8:57
Speaker 1: firsty one hundred doing well does not mean that every
8:59
Speaker 1: cant situent in it is doing exactly what you wanted
9:02
Speaker 1: to do.
9:03
Speaker 3: Yeah. I mean, it has been a good week for
9:05
Speaker 3: some of the stalks, but that's that is quite a
9:07
Speaker 3: big one, it is.
9:09
Speaker 1: And it's also you know, you alwas thinking it as
9:11
Speaker 1: a private equity portfolio, don't you, so when you suddenly
9:14
Speaker 1: realize that, in fact, it's a it's a large it's
9:16
Speaker 1: a large retailer with a couple of little private acty
9:18
Speaker 1: things around the edge.
9:19
Speaker 2: It's a slightly different kind of portfolio.
9:21
Speaker 1: Anyway, leaving that aside, UK growth, do we want to
9:24
Speaker 1: talk about the miseries of that?
9:27
Speaker 3: Do I find GDP figures really just send me sleep.
9:31
Speaker 3: It's terrible. They're so constantly devised all the time, and
9:36
Speaker 3: all you do is need to see you know what,
9:38
Speaker 3: if it had been point two instead of point one, okay,
9:41
Speaker 3: the points would have been a bit more positive, but
9:43
Speaker 3: it's still rubbish. So all we could say is that
9:47
Speaker 3: the economy continues to be very, very sluggish, and it's
9:51
Speaker 3: basically don't incredibly bad management not just by this government
9:55
Speaker 3: but by previous governments as.
9:57
Speaker 1: Well, but many many previous governments. But certainly they run
10:00
Speaker 1: up to this budget is not helping it. We were
10:02
Speaker 1: talking before we started recording with me about about all
10:05
Speaker 1: the different taxes that might come and go, everything from
10:08
Speaker 1: changes to pension tax, two different different income tax bands,
10:12
Speaker 1: to god in a salary sacrifice and not being able
10:15
Speaker 1: to put your expensive bicycle through anything. I think I
10:17
Speaker 1: slightly approve of that. Want to be honest, should you
10:19
Speaker 1: really be able to put those expensive bicycles?
10:21
Speaker 3: I don't know, be a little bit more really going
10:27
Speaker 3: to bicycles? No, she's going to cap it two key.
10:33
Speaker 3: That's not very pleasant for anyone who's attempting to can
10:37
Speaker 3: save for the retirement during the peak ending season.
10:41
Speaker 1: What do you mean, did you not get a cap
10:42
Speaker 1: what you can put into your pension to two k?
10:45
Speaker 3: No, but it's going to cap no, no, no, no.
10:50
Speaker 3: Before your employer is going to have to share national insurance,
10:54
Speaker 3: you're gonna have to share it. As well, So I mean,
10:59
Speaker 3: I think, you know it might not happen. It's like,
11:02
Speaker 3: but I mean, you're right this. I think the problem
11:05
Speaker 3: is that on the one hand, the Overton, the fiscal
11:07
Speaker 3: Overton window has been blown wide open. So like you know,
11:11
Speaker 3: a while ago, there were certain things you could say, Okay,
11:14
Speaker 3: the government stupids, but they're not going to do this
11:16
Speaker 3: because that would just be so obviously a bad idea.
11:19
Speaker 3: And so there was a group of policies that they
11:21
Speaker 3: would do. And this is now something could come in
11:24
Speaker 3: and just make something up and you still wouldn't have
11:27
Speaker 3: any idea if it was actually going to happen or not,
11:29
Speaker 3: because anything goes And this is partly the result of
11:33
Speaker 3: the havoc at the top, because there is clearly a
11:37
Speaker 3: war at the top or who gets to say what's
11:40
Speaker 3: going to kind of be in the budget. And Rachel
11:42
Speaker 3: Reeves is worried because obviously she's worried about appeasing her
11:46
Speaker 3: own party members and kind of you know, the gelp's
11:50
Speaker 3: market and also the voters. And I think obviously she's thinking, well,
11:54
Speaker 3: am I actually going to survive this? And that's why
11:57
Speaker 3: we're also hearing talk about getting rid of this too
11:59
Speaker 3: child benefit CAUP, which is clearly not an affordable situation
12:04
Speaker 3: or choice, and it hasn't become any more affordable since
12:07
Speaker 3: she said it was unaffordable last year. But I kind
12:09
Speaker 3: of saw up to the left wing and her party, and.
12:13
Speaker 1: I suppose it's also worth noting that when we talk
12:14
Speaker 1: about the two child benefit CAUP, a lot of the
12:16
Speaker 1: conversation around it so it suggests it's not possible to
12:19
Speaker 1: have more than two children, And of course you can
12:21
Speaker 1: have as many children as you like outside the benefit
12:25
Speaker 1: system and also within the benefit system, and there are
12:28
Speaker 1: only certain parts of the system that capped at two children.
12:32
Speaker 2: There are.
12:33
Speaker 1: Yes, it's a complicated system. It's a very complicated system.
12:37
Speaker 1: The UK benefit system is much more complicated than most
12:40
Speaker 1: people realize. In fact, we've been chatting earlier and I
12:42
Speaker 1: would encourage anybody who's interested in how the benefit system
12:45
Speaker 1: actually works and what you can and can't get on
12:47
Speaker 1: welfare to go and look at a website called entitled
12:50
Speaker 1: two dot co dot uk, where you can input all
12:52
Speaker 1: sorts of variables and find out for yourself exactly how
12:55
Speaker 1: it is complicated.
12:56
Speaker 2: It is complicated.
12:58
Speaker 3: You may also find the entitled Suddenly didn't know what
13:00
Speaker 3: we are.
13:01
Speaker 1: That's not what we're encouraging.
13:03
Speaker 3: I'm not encouraging it. More of our lessons would be
13:06
Speaker 3: surprised if the will is true.
13:08
Speaker 1: They might be surprised to find that they are inside
13:11
Speaker 1: the system. Anyway, Moving on from that, this is not
13:14
Speaker 1: not a program about how to claim benefits that TikTok
13:16
Speaker 1: is available for that.
13:19
Speaker 2: Let's move on to talking about the US market.
13:23
Speaker 1: And they've been quite a few interesting pieces on on
13:26
Speaker 1: Bloomberg about this recently, and.
13:29
Speaker 2: So there is em for starters.
13:30
Speaker 1: Let's say that there's been a report from Oppenheimer at
13:34
Speaker 1: Goldman SAX who points out that US equities are likely
13:37
Speaker 1: to lag other markets.
13:38
Speaker 2: For the next decade or so.
13:39
Speaker 1: I mean, this is all about if you're going to
13:41
Speaker 1: invest the starting prices what matters. And he expects over
13:44
Speaker 1: the next ten years to see six and a half
13:46
Speaker 1: percent from from US markets, which personally I think is ambitious,
13:50
Speaker 1: but he's looking at totally different numbers for other markets,
13:53
Speaker 1: so emerging markets ten point nine percent, he sees, it's
13:56
Speaker 1: just the strongest over the next decade. Now, of course,
13:58
Speaker 1: to think to worry about in the US is the
14:01
Speaker 1: great AI bubble, which I think you also think is
14:03
Speaker 1: a bubble. I think we're as one on this bubble thing,
14:05
Speaker 1: aren't we.
14:05
Speaker 3: John, Definitely. I think we've got to acknowledge that just
14:08
Speaker 3: because you think something's a bubble doesn't mean that you
14:10
Speaker 3: have any idea when it's going to pop.
14:12
Speaker 2: And it also doesn't absolutely.
14:14
Speaker 3: It's the only extent is it is meaningless. But there's
14:17
Speaker 3: been a lot of interest and stuff come out about it,
14:19
Speaker 3: and I think that's starting to get I think we're
14:22
Speaker 3: starting to get a better sense of where the problems lie.
14:28
Speaker 3: And it's sort of this whole thing about Do you
14:31
Speaker 3: want to talk about the chep depreciation?
14:33
Speaker 1: Yeah, I do, But I want to briefly mention things
14:36
Speaker 1: that that people are now talking about in a much
14:39
Speaker 1: sort of wider and louder way than they were previously.
14:42
Speaker 1: I mean, we've talked before about the energy problems of AI,
14:46
Speaker 1: the ability for data centers to connect to the electricity
14:50
Speaker 1: that they need to keep things going in the extent
14:52
Speaker 1: to which a data centers already using vast amouns for
14:55
Speaker 1: electricity in the US and indeed in the UK. So
14:58
Speaker 1: there is this limiting factor energy that is beginning to
15:01
Speaker 1: be discussed more outside the niche areas that we're discussing
15:04
Speaker 1: it previately. And then there's also the infrastructure issues you
15:07
Speaker 1: and there's a lot of people who who want companies
15:10
Speaker 1: that want to use a lot of a lot of
15:12
Speaker 1: data center capacity and are finding that the data centers
15:14
Speaker 1: aren't going up fast enough. So you've got an energy problem,
15:17
Speaker 1: you've got an infrastructure problem, and then as you say,
15:20
Speaker 1: you've got this quite interesting depreciation issue.
15:23
Speaker 3: This is interesting, I'm not like completely across. The basic
15:27
Speaker 3: point is that for AI to work, these companies need
15:31
Speaker 3: to keep investing in very expensive micro chips. And the
15:35
Speaker 3: issue is that these things have an uncertain shelf life.
15:41
Speaker 3: So if you want to keep up with the latest DII,
15:43
Speaker 3: you need to keep investing in the latest chips. But
15:46
Speaker 3: that means that the ones you spend, you know, hundreds
15:48
Speaker 3: of millions of billions of dollars on three years ago
15:52
Speaker 3: are no longer as valuable on your balance sheet as
15:55
Speaker 3: you thought they were going to be. Understand And basically
15:58
Speaker 3: the amount that you haven't a right off every year
16:01
Speaker 3: is you know, you're already investing a lot, you're writing
16:04
Speaker 3: down a lot, and are your kind of revenues going
16:06
Speaker 3: to actually cover that and then on top of that,
16:09
Speaker 3: you've got all of these slightly weird circular deals that
16:12
Speaker 3: they're all doing with each other where somebody buys the
16:14
Speaker 3: chips but then they rent them back off them or whatever.
16:17
Speaker 3: And then on top of that, you've got the interaction
16:20
Speaker 3: with private debt markets. With all of this, so where's
16:24
Speaker 3: the funding coming from? How it opaque or not? Is
16:27
Speaker 3: it what happens if the smaller players particularly start to
16:32
Speaker 3: kind of go bust or be unable to care popular payments,
16:36
Speaker 3: that sort of thing. So you can see that there's
16:38
Speaker 3: a there's a running out of road element to it, and.
16:43
Speaker 1: I suppose that just to go back to the depreciation
16:46
Speaker 1: that the key point is that there is a there's
16:48
Speaker 1: an idea that possibly the big companies are underestimating depreciation,
16:54
Speaker 1: they're not doing it fast enough, and that makes the
16:56
Speaker 1: balance looks rather better than they should right their accounting,
17:01
Speaker 1: their accounting assumptions are just a little bit too generous.
17:04
Speaker 2: Now, that brings us back to something we were talking.
17:07
Speaker 4: About last week, to this idea that JKKW Brave had
17:12
Speaker 4: about his term the bezel right, which he wrote about
17:16
Speaker 4: in The Great Crash, his book on that Great Crest
17:19
Speaker 4: nineteen twenty nine, and shall.
17:21
Speaker 2: I read you the paragraph as well alone.
17:24
Speaker 1: Among the various forms of larceny, bragger's embezzlement has a
17:27
Speaker 1: time parameter. Weeks, months, or years may allapse between the
17:30
Speaker 1: commission of the crime and this discovery. This is a period, incidentally,
17:33
Speaker 1: when the embezzler has his gain and the man who
17:35
Speaker 1: has been embezzled oddly enough field to no loss. There
17:38
Speaker 1: is a net increase in psychic wealth. At any given time,
17:42
Speaker 1: there exists an inventory of undiscovered embezzlement in or more
17:46
Speaker 1: precisely not in the country's business and banks. Now he's
17:50
Speaker 1: talking here about the bezel, this idea that there is
17:53
Speaker 1: a period in each bubble where there's a lot of
17:55
Speaker 1: fraud and corruption, larseny, embezzlement, whatever you like to call it,
17:58
Speaker 1: that people don't know out and when they begin to
18:01
Speaker 1: know about this inflated sense of value collapses.
18:05
Speaker 3: Yes, to be clear, we are not talking about moving
18:09
Speaker 3: on to that.
18:10
Speaker 2: Yeah, I am moving on to that.
18:12
Speaker 1: But so he talks about things that are basically illegal
18:16
Speaker 1: or close to illegal.
18:17
Speaker 3: I mean, he doesn't push the.
18:19
Speaker 1: Whole idea on quite as far as some other people have.
18:23
Speaker 1: But since then Charlie Munger bucks you halfway. I mean
18:25
Speaker 1: he sort of developed it in to more about the
18:30
Speaker 1: story when the story isn't quite true or the story
18:33
Speaker 1: doesn't help you understand everything. And this too creates a
18:37
Speaker 1: sense of psychic value. So the bezel is the word
18:40
Speaker 1: for the disconnect between what you think the value of
18:43
Speaker 1: an acid is and what you will come to understand
18:47
Speaker 1: it is over time.
18:48
Speaker 2: That's also the bezel.
18:50
Speaker 1: So it's not necessarily about illegality, but it is about
18:53
Speaker 1: things like vendor financing, that kind of circularity that we've
18:57
Speaker 1: talked about before.
18:58
Speaker 2: It is about perhaps.
18:59
Speaker 1: Getting an appreciation wrong and making things look better than
19:02
Speaker 1: they really are. It's about all these things about necessarily fraud,
19:06
Speaker 1: they're not last andy, they're not actually embezzlement, but they
19:09
Speaker 1: are part of the bezel that comes towards the end
19:12
Speaker 1: of most bubbles.
19:14
Speaker 3: Yeah, it's the stuff you can get away with because
19:16
Speaker 3: everyone wants to believe Yeah, funnly and I do. Yeah.
19:20
Speaker 3: And it's interesting to see that this is the sort
19:22
Speaker 3: of we're standing to get signs of where that might
19:26
Speaker 3: crop up. And I think that that again you're getting
19:30
Speaker 3: the sense that people are looking at AI and starting
19:33
Speaker 3: to ask Okay, so how is this going to actually
19:35
Speaker 3: pay off? Now you've got a little bit beyond people
19:38
Speaker 3: just unthinkingly just buying into the hype and starting to say, so,
19:43
Speaker 3: where's the payoff? You know, like kind of expectations are
19:47
Speaker 3: starting to crystallize a bit, so we're interested to see
19:50
Speaker 3: what happens with that. I mean, I still find it's
19:55
Speaker 3: it's fascinating stuff because I'm not I am not an
19:57
Speaker 3: e I skeptic. Things are clear happening in some industries
20:01
Speaker 3: more than others, you know, and people you know there
20:05
Speaker 3: is having an impact on certain jobs in some places.
20:09
Speaker 3: I was reading another piece of Bloomberg this morning. I
20:11
Speaker 3: was pointing out that a lot of banking customer service
20:14
Speaker 3: layoffs have been driven by AI, and I can see
20:18
Speaker 3: things like that happening. So I guess, I guess it
20:21
Speaker 3: is like the dot com boom all over again. Something
20:26
Speaker 3: big is going on. But simultaneously we can also have
20:30
Speaker 3: a big market crash simply because we're priced in too
20:33
Speaker 3: much too soon.
20:35
Speaker 1: And so it's probably the point in the cycle when
20:39
Speaker 1: people heavily invested in the US should wonder what part
20:42
Speaker 1: of their wealth is psychic wealth, and what part of
20:45
Speaker 1: their wealth is real wealth.
20:48
Speaker 3: That's an interesting one. It's a bit like your household
20:52
Speaker 3: balance sheet. For your house price in the UK, you
20:55
Speaker 3: may need to ads that depending on when you put
20:58
Speaker 3: your home.
20:59
Speaker 1: Exactly him you think your house is worth, and how
21:01
Speaker 1: much is it really worth? I remember again, I will decide.
21:04
Speaker 1: I don't know how often I tell you the story,
21:05
Speaker 1: but I'm going to tell you once more, once more
21:08
Speaker 1: about that wonderful survey, possibly my favorite survey ever. It
21:12
Speaker 1: must have been two thousand and nine ish, asking people
21:16
Speaker 1: in the UK about house prices in the UK and
21:19
Speaker 1: what they expected, and everybody said, house prices are falling
21:22
Speaker 1: across the UK, and and continued to fall across the UK,
21:25
Speaker 1: but they're not going to fall in my neighborhood because
21:29
Speaker 1: we have a special community or a really great pub,
21:31
Speaker 1: or a marvelous market or the best school or whatever
21:35
Speaker 1: it is.
21:35
Speaker 2: And so people went into a period of.
21:38
Speaker 1: Absolute denial about their own houses while accepting that the
21:43
Speaker 1: nominal price of everybody else's houses was going to fall.
21:47
Speaker 2: We may be approaching that period again.
21:51
Speaker 3: Well, at least they make it some commity selfies out
21:53
Speaker 3: of it.
21:55
Speaker 1: Oh, I'd love to see that survey again, you know,
21:58
Speaker 1: obviously I can't actually find that survey. I've been looking
22:01
Speaker 1: for it for ages so that I can actually read
22:03
Speaker 1: you bits of it because I loved it so much.
22:05
Speaker 1: I can't find it. When we finished this, I'm going
22:07
Speaker 1: to look for it again. In fact, we're going to
22:08
Speaker 1: finish this right now so I can go look for
22:10
Speaker 1: it again.
22:10
Speaker 3: Okay, Thanks John, Thanks Mail.
22:20
Speaker 2: Thanks for listening to this week's Marin Talks Money Debrief.
22:23
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22:25
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22:31
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22:37
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22:40
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