Latest / Merryn Talks Money / Why the UK Stock Market May Be Slowly Dying with Peel Hunt's Charles Hall

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Why the UK Stock Market May Be Slowly Dying with Peel Hunt's Charles Hall · Merryn Talks Money

• 0:03
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news, John Man, how excited
• 0:11
  Speaker 1: are you about inflection coming down? A little bit?
• 0:14
  Speaker 2: A little bit, a little bit. It's been getting a
• 0:19
  Speaker 2: bit boring now because we know that it's going to
• 0:23
  Speaker 2: go down to kicking around two percent by the next
• 0:27
  Speaker 2: act next month. It will probably be not far off
• 0:29
  Speaker 2: to because we get the price cap, the energy price
• 0:33
  Speaker 2: cap comes down, and that makes all the difference. And
• 0:36
  Speaker 2: then for the rest of the year we're going to
• 0:37
  Speaker 2: spend time kind of knocking around that level probably and
• 0:42
  Speaker 2: everyone will be quibbling over tenths of a percentage point
• 0:47
  Speaker 2: and that's going to be it, I think, for most
• 0:50
  Speaker 2: of twenty twenty four. And the inflation price starts to
• 0:53
  Speaker 2: pick up a little bit towards the end of the year,
• 0:55
  Speaker 2: but it will still be around about two three percent,
• 0:58
  Speaker 2: and by that point will know me the next election
• 1:01
  Speaker 2: is so yeah, it's kind of like, hurry up, let's
• 1:03
  Speaker 2: get to the chase.
• 1:04
  Speaker 1: I'm glad that you find inflation boring, you know, I've
• 1:07
  Speaker 1: been listening. I was listening to something on the radio
• 1:10
  Speaker 1: yesterday and the presenter was asking people in the shops
• 1:13
  Speaker 1: if they noticed inflation was falling, and it was fascinating
• 1:17
  Speaker 1: because everybody was saying, oh, do you know, I don't
• 1:19
  Speaker 1: really think things are getting cheaper, And I was thinking
• 1:22
  Speaker 1: to myself, gosh, do we really still have to do this?
• 1:24
  Speaker 1: We still have to explain that falling inflation needs. Prices
• 1:28
  Speaker 1: are still going up just less. We're having presenters walking
• 1:31
  Speaker 1: around supermarkets asking them if they've noticed price is falling.
• 1:34
  Speaker 1: It just wants to break your hair out, doesn't it.
• 1:36
  Speaker 2: It is kind of editating. I mean, I wouldn't mind
• 1:39
  Speaker 2: so much, but these same people are constantly saying we
• 1:41
  Speaker 2: need more personal finance education in schools. You can't even
• 1:45
  Speaker 2: get a rate a change correct now, it's actually it's
• 1:49
  Speaker 2: charged in fury. And they also the inflation rate thing.
• 1:53
  Speaker 2: I saw someone the other day from the BBC and
• 1:55
  Speaker 2: I thought, okay, it's good, you've made one step, but
• 1:58
  Speaker 2: there were point in that it's not the prices have
• 2:01
  Speaker 2: stopped rising, you're just getting poorer at a slower rate.
• 2:04
  Speaker 2: And you're right, Well, actual say, no, that's wrong too,
• 2:07
  Speaker 2: because wages have going up faster than inflation. Yep, no,
• 2:10
  Speaker 2: because so you know, have you not noticed that the
• 2:13
  Speaker 2: central bank has got a target of two percent? You know,
• 2:16
  Speaker 2: so if we stuck to the Central Bank's targeting that
• 2:18
  Speaker 2: was the definition of getting poorer all the time. I
• 2:22
  Speaker 2: just it is somewhat baffling that there are a lot
• 2:24
  Speaker 2: of can I grow in adults, all of them with
• 2:27
  Speaker 2: the college degrees or university degrees, and none of them
• 2:30
  Speaker 2: seemed to be able to get this right. It's not hard.
• 2:33
  Speaker 1: Well, interestingly, a lot of people seem to love the
• 2:35
  Speaker 1: idea of us getting poorer all the time. But maybe
• 2:38
  Speaker 1: that's maybe that's for another day. Now, listen, given that
• 2:41
  Speaker 1: we have this this now, but that is still not
• 2:44
  Speaker 1: quite a target, do we now think? I mean, you
• 2:47
  Speaker 1: and I have always, well for quite some time now
• 2:49
  Speaker 1: held the view that rates are going to stay higher
• 2:52
  Speaker 1: for longer and they were never going to come down
• 2:54
  Speaker 1: as fast as the transitory grade thought. So we now
• 2:59
  Speaker 1: are little vindicated, don't we.
• 3:02
  Speaker 2: I mean I think so. I mean the transitory a
• 3:05
  Speaker 2: lot still try to pretend that it really was transit trikers.
• 3:08
  Speaker 2: Now it's nearly black at target. But no, I think
• 3:11
  Speaker 2: we're vindicated. And I think the more important point anyway,
• 3:15
  Speaker 2: is that we'll back at rates that are actually kind
• 3:18
  Speaker 2: of normal by historic standards, and unless something catastrophic happens
• 3:23
  Speaker 2: to the eco enemy. The bank at England based rate
• 3:25
  Speaker 2: is not going to go back to two percent or below,
• 3:29
  Speaker 2: or maybe even three percent or below anytime soon, perhaps
• 3:33
  Speaker 2: not even in lifetimes. So I think that's the important point.
• 3:38
  Speaker 1: Yeah. Now, this is the really useful point and the
• 3:40
  Speaker 1: one that I think we have to keep making over
• 3:42
  Speaker 1: and over again, which is that there remains of you
• 3:44
  Speaker 1: pretty much across the board that once inflation gets two
• 3:48
  Speaker 1: target to two percent, then interest rates can go right
• 3:51
  Speaker 1: back down again to where they were before this whole
• 3:54
  Speaker 1: incident began. But that is not what's going to happen.
• 3:58
  Speaker 1: You may see rates come down a little bit, you know,
• 4:01
  Speaker 1: as maybe we'll move into a more recessionary environment or whatever.
• 4:04
  Speaker 1: Over time, you may see rates come down a little bit,
• 4:06
  Speaker 1: but you're not going to see central banks, I hope,
• 4:09
  Speaker 1: make the same absurd mistake they've made over the last
• 4:11
  Speaker 1: decade or so of bringing them down to ridiculously low rates.
• 4:15
  Speaker 1: Everyone wants normal interest rates, so the idea right to
• 4:19
  Speaker 1: going back to one percent barring some incredibly extreme crisis
• 4:23
  Speaker 1: is just silly, right.
• 4:24
  Speaker 2: It is silly. And the other thing I think this
• 4:27
  Speaker 2: then also leads on to is that the obvious solution
• 4:33
  Speaker 2: for getting the economy over the huddle from being at
• 4:36
  Speaker 2: zero interest rates to five percent interest rates is to
• 4:39
  Speaker 2: allow inflation to not let rip, but to kick around
• 4:44
  Speaker 2: the kind of three ish almost four percent marks rather
• 4:48
  Speaker 2: than the one is two percent mark, because that way
• 4:52
  Speaker 2: you kind of inflate away everybody's debt quite gently, and
• 4:56
  Speaker 2: then you get back to the point where having interest
• 4:58
  Speaker 2: rates where they are now is not going to kind
• 5:01
  Speaker 2: of cripple the consumer or companies or the government. And
• 5:05
  Speaker 2: so I think the most interesting thing about all the
• 5:08
  Speaker 2: chat about changing the inflation target is the timing. You know,
• 5:12
  Speaker 2: it's more basically or you know, lots of people including
• 5:15
  Speaker 2: I mean mohammadal Area and who's obviously highly respected, et cetera.
• 5:19
  Speaker 2: You know, I've been calling for a kind of federal
• 5:21
  Speaker 2: reserve inflation target close at the three percent. I saw
• 5:24
  Speaker 2: a Bloomberg article yesterday basically complaining about how the New
• 5:28
  Speaker 2: Zealand Central Bank was being too rigid about it's two
• 5:31
  Speaker 2: percent target and now that was sending the economy into
• 5:34
  Speaker 2: a double dip recession over there. So I think this
• 5:38
  Speaker 2: this all comes from that almost it's kind of sense
• 5:43
  Speaker 2: that actually, yes, inflation is going to need to be
• 5:45
  Speaker 2: allowed to run a little bit hotter to adjust. It's
• 5:48
  Speaker 2: back to a world day higher interest rates and normality
• 5:52
  Speaker 2: from a world that was extremely weird from two thousand
• 5:55
  Speaker 2: and eight onwards.
• 5:56
  Speaker 1: Interesting, the financial repression we've been talking about for years.
• 5:59
  Speaker 1: But going back to this idea of changing the target,
• 6:03
  Speaker 1: I mean to what in that as we have discussed
• 6:05
  Speaker 1: double times before, the two percent target in the first
• 6:08
  Speaker 1: place is entirely random, So change it for what a
• 6:11
  Speaker 1: three percent one which is entirely random, one and a
• 6:13
  Speaker 1: half percent entirely random, four percent entirely random.
• 6:16
  Speaker 2: There is no real rationale for this beyond that academic
• 6:20
  Speaker 2: paper you dug out a while ago, and obviously the
• 6:24
  Speaker 2: New Zealand Central Bank kind of pulled out is thin there.
• 6:27
  Speaker 2: I'm sure I read somewhere that in our in conversations
• 6:31
  Speaker 2: about the target they had considered as high as five percent,
• 6:35
  Speaker 2: because at the time New Zealand inflation was knocking around
• 6:37
  Speaker 2: seven eight percent, and so you can see that you
• 6:42
  Speaker 2: know that it has kind of come out in no way.
• 6:45
  Speaker 2: But I mean, and my view is that actually Milton
• 6:48
  Speaker 2: Friedman was right on this because that bit where he
• 6:50
  Speaker 2: talks about how interest rate changes act with long and
• 6:53
  Speaker 2: variable lags. I mean, that's going down kind of like
• 6:57
  Speaker 2: that's famous because the idea is that when the central
• 7:00
  Speaker 2: bank changes interest rates won't affect things for about eighteen months.
• 7:04
  Speaker 2: But the point that Freedman was actually making was that,
• 7:06
  Speaker 2: so there's no point when having the central bank move
• 7:09
  Speaker 2: interest rate. It's about just have interest rates at a
• 7:12
  Speaker 2: specific level and then everyone, you know, the market can
• 7:15
  Speaker 2: kind of dance around that. And I think that's a
• 7:18
  Speaker 2: more sensible way. Actually, I think get the central bank
• 7:21
  Speaker 2: out of the business of setting interest rates. It should
• 7:24
  Speaker 2: still be the lend of the last resort, should still
• 7:27
  Speaker 2: be there for if the banking system collapses, but it
• 7:31
  Speaker 2: shouldn't be you know, messing about like months to months
• 7:35
  Speaker 2: and we're all obsessing about a quarter point bike. Yeah,
• 7:38
  Speaker 2: you know, it's it's kind of ridiculous.
• 7:40
  Speaker 1: Oh we have Well, we had Mervin King on this
• 7:41
  Speaker 1: podcast a while back, you probably remember, and I talked
• 7:44
  Speaker 1: to him about whether we should change the target, and
• 7:47
  Speaker 1: he was pretty clear on it. It was like, well,
• 7:49
  Speaker 1: you know, already we don't have that much trust for
• 7:51
  Speaker 1: central banks anymore, and if they go around the place
• 7:53
  Speaker 1: changing targets to fit what is happening rather than the
• 7:56
  Speaker 1: other way around. Then we're going to lose even more
• 7:59
  Speaker 1: trust in the central Bank, which isn't really a great thing. Yeah.
• 8:03
  Speaker 2: This, if it's all a confidence game, then that's not
• 8:06
  Speaker 2: the way you play it.
• 8:07
  Speaker 1: It's all a confidence game. And everything's a confidence game. John,
• 8:11
  Speaker 1: that's markets for you. That's markets for you, which you're
• 8:14
  Speaker 1: also beginning to shift vaguely in the direction that we expected. Right,
• 8:17
  Speaker 1: So the S and P. Five hundred is off quite
• 8:20
  Speaker 1: a bit. The Magnificent seven are no longer than magnificent seven.
• 8:24
  Speaker 1: It looks like we might eventually get our way and
• 8:26
  Speaker 1: start to see value of cheap stuff begin to aberform.
• 8:31
  Speaker 2: Yes, let's hope so. And it doesn't. Today's guests have
• 8:35
  Speaker 2: some things to say about that.
• 8:37
  Speaker 1: Yes, you're right. We do have a guest who talks
• 8:39
  Speaker 1: about all these things, and he was one of those
• 8:41
  Speaker 1: guests who I agreed with on all most everything, which
• 8:45
  Speaker 1: I don't know if that's a good thing or a
• 8:46
  Speaker 1: bad thing. I like to think it's a good thing,
• 8:48
  Speaker 1: but listeners may think it's a bad thing anyway. It's
• 8:50
  Speaker 1: Charles Hall, head of research at pel Hunt, that we
• 8:53
  Speaker 1: have talked at you and I a lot before about
• 8:56
  Speaker 1: the kind of things that I discussed with him about
• 9:00
  Speaker 1: why we should abolish stamp duty on UK equities in
• 9:02
  Speaker 1: the appallingness of the way that affects our markets. You've
• 9:05
  Speaker 1: written about that I've written about that will put links
• 9:07
  Speaker 1: to those columns in the show notes. He talks a
• 9:10
  Speaker 1: lot about how things should be changed in the pensions
• 9:12
  Speaker 1: market and the iSER market, how we should basically reapproach
• 9:15
  Speaker 1: the whole infrastructure around our listed markets and how important
• 9:19
  Speaker 1: that is. And we invited him a particularly because we
• 9:22
  Speaker 1: like the way he writes, but also he's one of
• 9:24
  Speaker 1: the one of the big voices inside this conversation. You
• 9:27
  Speaker 1: read all this stuff right, I certainly do.
• 9:29
  Speaker 2: Yeah, definitely.
• 9:31
  Speaker 1: So this is well worth listening to and once you've
• 9:33
  Speaker 1: listened to it, you should write to your MP and
• 9:35
  Speaker 1: tell them to do everything that Charles says they should do.
• 9:42
  Speaker 1: Welcome to Meren Talks Money, the podcast in which people
• 9:44
  Speaker 1: who know the markets explain the markets. I'm Maren sum
• 9:47
  Speaker 1: Zet Web. This week a conversation with peel Ants head
• 9:49
  Speaker 1: of Research Charles Hall about his mission, our mission to
• 9:52
  Speaker 1: revive UK equity markets and why that really matters. Charles,
• 9:58
  Speaker 1: thank you so much for joining us today. We really
• 10:00
  Speaker 1: appreciate it a pleasure. Marin. Now you have been much
• 10:04
  Speaker 1: quoted in columns I have written, and in columns that
• 10:08
  Speaker 1: John has written, and I suspect we may even have
• 10:11
  Speaker 1: mentioned you on the podcast. So it is very pleasing
• 10:14
  Speaker 1: to have you here in person. You can actually say
• 10:16
  Speaker 1: things in your own words rather than have us manipulate
• 10:18
  Speaker 1: your words to have you say what we want you
• 10:20
  Speaker 1: to say, which will be something of a treat for you.
• 10:23
  Speaker 1: So let's start with right, We're going to start and
• 10:26
  Speaker 1: finish and all the way through the middle the UK market.
• 10:30
  Speaker 1: Let's start with what an earth is wrong with the
• 10:34
  Speaker 1: UK stock market?
• 10:36
  Speaker 3: Where do we start? Gosh, there is so much wrong,
• 10:39
  Speaker 3: and it pains me to say it as a specialist
• 10:41
  Speaker 3: in the UK market and have been for many years.
• 10:43
  Speaker 3: But the essential problem is the fund outflows from the
• 10:48
  Speaker 3: UK market and valuation is just one part of the
• 10:52
  Speaker 3: equation of why stocks and shares go up over time,
• 10:55
  Speaker 3: though it is the flow of money going into companies
• 10:59
  Speaker 3: or the outflow as we've been seeing. We now have
• 11:03
  Speaker 3: thirty four months in a row where there have been
• 11:05
  Speaker 3: outflows from UK equity funds, so almost three years worth.
• 11:09
  Speaker 3: There was already a structural issue with overseas investors shying
• 11:14
  Speaker 3: away post Brexit. Obviously we've had all the COVID issues,
• 11:18
  Speaker 3: the energy issues, the inflation issues, But underlying it all
• 11:22
  Speaker 3: is this fund outflows and retail investors are going more global,
• 11:26
  Speaker 3: pension funds are de risking, pension funds are also moving
• 11:29
  Speaker 3: into global assets, and so who is there to buy
• 11:33
  Speaker 3: the UK market? And the reality is there isn't anyone
• 11:36
  Speaker 3: at the moment that is making a big enough difference
• 11:38
  Speaker 3: to offset those outflows.
• 11:40
  Speaker 1: So in essence, it's a long term trend where UK
• 11:43
  Speaker 1: retail investors used to own UK equities, UK pension funds
• 11:47
  Speaker 1: used to own UK equities. Wealth managers operating in the
• 11:50
  Speaker 1: UK used to own UK equities, and now they think
• 11:53
  Speaker 1: to themselves, that's a little boring, a little dull. Maybe
• 11:55
  Speaker 1: I'm not diversified enough. I should invest globally. And investing
• 11:58
  Speaker 1: globally we know what that means, ready means in the
• 12:00
  Speaker 1: US it effectively means following global benchmarks, and that's around
• 12:03
  Speaker 1: seventy percent for US. So all the money that was
• 12:07
  Speaker 1: invested in the UK by people who live in the
• 12:09
  Speaker 1: UK and look to receive their pensions in our currency, etc.
• 12:13
  Speaker 3: And are all investing abroad. That's absolutely bang on, Yes, yep,
• 12:18
  Speaker 3: one hundred percent correct. And the issue is that the
• 12:21
  Speaker 3: incentivization is all to go overseas. We're giving taxpayers money
• 12:25
  Speaker 3: in people's SIPs, in their isers and effectively say go
• 12:29
  Speaker 3: and spend it wherever you like. It's absolutely fine, no problem,
• 12:31
  Speaker 3: have the tax break on us. We are world leaders
• 12:34
  Speaker 3: in funding companies overseas instead of our own. And this
• 12:38
  Speaker 3: is the heart of the issue. I'm calling it selfish investment.
• 12:43
  Speaker 3: What's good for me as an individual, good for a
• 12:46
  Speaker 3: particular pension fund ability to go and access all the
• 12:50
  Speaker 3: Magnificent seven or whoever you want to access overseas, that's
• 12:53
  Speaker 3: great for us individually. Collectively, it's a total disaster and
• 12:57
  Speaker 3: this is the situation we've got ourselves in. We believe
• 13:00
  Speaker 3: in the UK and lazy fair. Let everyone do what
• 13:03
  Speaker 3: they want. Markets will sort themselves out, and that has
• 13:07
  Speaker 3: worked in the past. It is one hundred percent not
• 13:09
  Speaker 3: working now.
• 13:10
  Speaker 1: That kind of thing only works if everyone believes in it,
• 13:12
  Speaker 1: and when you're the only person believing in market forces
• 13:14
  Speaker 1: in leaso fair and it can come back to bite.
• 13:17
  Speaker 1: Let's go back to be I want to come back
• 13:20
  Speaker 1: to this business of us using our tax breaks to
• 13:23
  Speaker 1: fund companies abroad, because I think it's very interesting and
• 13:26
  Speaker 1: very important. But let's come back if you don't mind.
• 13:28
  Speaker 1: To the driver behind it rather flippantly said it'd people
• 13:31
  Speaker 1: want to diversify and good more exciting places abroad. But
• 13:34
  Speaker 1: is that really all it was? When the big pensions
• 13:36
  Speaker 1: fund and the wealth managers started looking at their UK
• 13:39
  Speaker 1: a gooitty exposure, what is it that actually drove them
• 13:43
  Speaker 1: abroad like that?
• 13:44
  Speaker 3: Yeah, it's a lot more than that. It's regulation and
• 13:46
  Speaker 3: risk is at the heart of what's been going on,
• 13:50
  Speaker 3: and we've seen some disastrous decisions have been made in
• 13:53
  Speaker 3: our pension schemes over the last twenty five years. Effectively,
• 13:57
  Speaker 3: they've been a black hole for a load of companies
• 14:00
  Speaker 3: who have been shoveling cash into their pension funds and
• 14:03
  Speaker 3: are finding that they get zero benefit either for the
• 14:05
  Speaker 3: company or for the pensioners, or for the economy, or
• 14:10
  Speaker 3: for the taxpayer. And the taxpayer would be a good
• 14:12
  Speaker 3: example here where you may not think that it matters,
• 14:15
  Speaker 3: but it does because if you put money into the
• 14:17
  Speaker 3: pension fund, you get a rebate on your tax scheme,
• 14:21
  Speaker 3: so it's probably cost the UK fifty billion pounds. So
• 14:24
  Speaker 3: an appallingly disastrous set of decisions have been made over
• 14:28
  Speaker 3: decades that have got us to where we are. And
• 14:31
  Speaker 3: the real crying shame is that our pension funds have
• 14:35
  Speaker 3: been one of the worst performing pension funds around the world.
• 14:39
  Speaker 3: You know, if you look in Australia, you look at
• 14:41
  Speaker 3: the States, you look at Canada, many more pension funds
• 14:44
  Speaker 3: have outperformed us. And it may not be by much.
• 14:46
  Speaker 3: It may be one or two percent per year and
• 14:48
  Speaker 3: everyone goes, oh, it doesn't matter. The reality is over
• 14:51
  Speaker 3: twenty five years that adds up to a vast amount
• 14:54
  Speaker 3: of money and that's where we are. The good news is, yeah, exactly.
• 15:00
  Speaker 1: But we've encouraged our ends of dedvance explicitly encourage them
• 15:03
  Speaker 1: to move out of equities as well, out of equities
• 15:06
  Speaker 1: into bonds. So it's not just about moving equity exposure overseas,
• 15:09
  Speaker 1: it's also about moving out of equities altogether, particularly in
• 15:12
  Speaker 1: defined benefits sector.
• 15:13
  Speaker 3: It's worse than that is not even encouraged. It's effectively
• 15:16
  Speaker 3: told them that they have to and that's what the
• 15:18
  Speaker 3: actors have done, and that's what the trustees do. Everyone
• 15:23
  Speaker 3: is effectively working together to reduce risk, and unfortunately, in investing,
• 15:29
  Speaker 3: risk is part of the equation. If you take risk out,
• 15:33
  Speaker 3: you will massively underperform, and as well as I do.
• 15:36
  Speaker 3: Over the long term, equities massively outperform bonds and particularly
• 15:43
  Speaker 3: guilt or treasuries. And yet we have forced our pension
• 15:47
  Speaker 3: funds to invest in fixed interest at precisely the worst time.
• 15:52
  Speaker 3: And you look at the trajectory of our pension funds
• 15:55
  Speaker 3: and they are very correlated with that underperformance. And at
• 15:58
  Speaker 3: times when the bond market the yields were exceededly low,
• 16:03
  Speaker 3: that's when we were forcing them more into bonds.
• 16:06
  Speaker 1: And it's all maddening, isn't it, Because what should have
• 16:09
  Speaker 1: more of a long term view than a defined benefit
• 16:12
  Speaker 1: pension scheme. Visa by their very nature very long term vehicles,
• 16:16
  Speaker 1: and so they should, on the face of it, the
• 16:18
  Speaker 1: almost entirely invested in equities and go nowhere near bonds.
• 16:22
  Speaker 3: Yeah, and of course they have to have some matching
• 16:25
  Speaker 3: because they have liabilities they have to page year, so
• 16:27
  Speaker 3: you want to have some access to cash. But these
• 16:31
  Speaker 3: are very predictable long term funds, and unfortunately, our actors
• 16:34
  Speaker 3: just took a view that interest rates were going to
• 16:36
  Speaker 3: stay low forever, and they were wrong. And that's the
• 16:39
  Speaker 3: nub of it, isn't it.
• 16:41
  Speaker 1: Yes, I think a lot of people could have told
• 16:43
  Speaker 1: them that interest rates weren't going to stay that low forever.
• 16:45
  Speaker 1: But we won't cover that in this podcast, not today anyway,
• 16:49
  Speaker 1: We'll come back to it another day. Let's go back
• 16:51
  Speaker 1: to this point, very important point about the way in
• 16:54
  Speaker 1: which are tax wrappers not necessarily encouraged, but effectively finance
• 17:00
  Speaker 1: companies that are not in the UK. So pretty much
• 17:02
  Speaker 1: everyone in the UK will have the majority of their
• 17:05
  Speaker 1: equity exposure. Remember, a lot of people don't even know
• 17:07
  Speaker 1: they have equity exposure, but they do. They'll have it
• 17:09
  Speaker 1: through their dB pension, but in particular these days, they'll
• 17:12
  Speaker 1: have it through their defined contribution pension as a result
• 17:14
  Speaker 1: of water enrollment. And then an awful lot of people will
• 17:17
  Speaker 1: also have icerom investments which will know about and children
• 17:21
  Speaker 1: will have junior iers which will have equities in them
• 17:23
  Speaker 1: which they don't know about yet. So a lot of
• 17:25
  Speaker 1: people have equity exposure inside these tax rappers. Our tax
• 17:30
  Speaker 1: rappers are incredibly generous. As you say, with a step
• 17:33
  Speaker 1: you get your full income tax rebate, and with an ISA.
• 17:36
  Speaker 1: You get to put your money in after you've already
• 17:38
  Speaker 1: paid tax, and as long as it's inside the wrapper,
• 17:40
  Speaker 1: not a further penny of taxes to.
• 17:42
  Speaker 2: You on it.
• 17:43
  Speaker 1: And actually when you take it out, you take it
• 17:44
  Speaker 1: out of tax free as well. So these are very
• 17:46
  Speaker 1: generous tax rappers. But inside those wrappers you can use
• 17:51
  Speaker 1: the money to invest anywhere you like. Now a lot
• 17:54
  Speaker 1: of our listeners and readers think that's absolutely fine, but
• 17:57
  Speaker 1: I rather agree with you that it's not fine. So
• 18:00
  Speaker 1: could you explain why it is that? Do you think
• 18:03
  Speaker 1: it's not working for us?
• 18:05
  Speaker 3: This is a classic example of using UK wealth to
• 18:08
  Speaker 3: fund overseas companies. And personally it's great. I can invest
• 18:12
  Speaker 3: in Nvidia, I can invest in a fund that invests
• 18:15
  Speaker 3: in all those global icons in the US. That's brilliant
• 18:18
  Speaker 3: for me. But why should I get taxpayers money effectively
• 18:23
  Speaker 3: to enable me to do that. I can diversify my
• 18:26
  Speaker 3: portfolio as much as I like. Why do I need
• 18:28
  Speaker 3: to get a tax break to do that? That makes
• 18:31
  Speaker 3: no sense. So effectively we are giving taxpayers money to
• 18:36
  Speaker 3: enable people to invest wherever they like. We have got
• 18:39
  Speaker 3: a fantastic set of companies in the UK. Those companies
• 18:44
  Speaker 3: should be benefiting from UK money and certainly UK taxpayers money,
• 18:49
  Speaker 3: and unfortunately we're sending it overseas, which means that we
• 18:52
  Speaker 3: are enabling our companies or resulting in our companies being
• 18:56
  Speaker 3: a competitive disadvantage. And I'm sure you saw the comments
• 18:59
  Speaker 3: from the sho L CEO. That's a microcosm of what's
• 19:02
  Speaker 3: going on now that our companies are at a significant
• 19:05
  Speaker 3: discount to global peers, and that puts them at a
• 19:08
  Speaker 3: competitive disadvantage because we now operate on a global platform,
• 19:12
  Speaker 3: we don't operate in isolation.
• 19:14
  Speaker 1: So the money flows out. We effectively slightly reduce the
• 19:17
  Speaker 1: cost of capital for companies broad and slightly push it
• 19:20
  Speaker 1: out for companies here. And along the way, valuations collapse
• 19:25
  Speaker 1: for UK based companies, which makes them look even more
• 19:28
  Speaker 1: unattractive and then exciting companies think to themselves, when would
• 19:31
  Speaker 1: I list in the UK when I could go list
• 19:33
  Speaker 1: somewhere else at a much higher valuation, and then all
• 19:35
  Speaker 1: my options would be worth so much more, and particularly
• 19:38
  Speaker 1: if I weren't a list in the UK, were value
• 19:40
  Speaker 1: in the US where valuations are so much higher. Righty,
• 19:42
  Speaker 1: we get a bigger salary too, and all those options
• 19:45
  Speaker 1: every year they'd be worth more and more. So suddenly
• 19:47
  Speaker 1: we see an environment where companies are looking around themselves
• 19:50
  Speaker 1: and thinking, boy, there may be somewhere better to list.
• 19:52
  Speaker 1: Somewhere I could list that where the company would continue
• 19:54
  Speaker 1: to be just as brilliant, but I personally would be
• 19:56
  Speaker 1: significantly richer and wouldn't.
• 19:58
  Speaker 2: Be great, absolutely right.
• 20:00
  Speaker 3: And the US is acting as a sort of a
• 20:02
  Speaker 3: black hole, isn't it. You know, it is sucking everything
• 20:05
  Speaker 3: into it. And as you said, it's seventy percent of
• 20:07
  Speaker 3: the world markets, it's got the biggest pool of liquidity,
• 20:11
  Speaker 3: and companies are understandably taking the selfish reason to go
• 20:15
  Speaker 3: and list in the US to access those pools capital.
• 20:19
  Speaker 3: And we are doing absolutely nothing to prioritize our own economy.
• 20:23
  Speaker 3: And some people say to me, why does it matter?
• 20:25
  Speaker 3: Does it matter that the company goes and listening to
• 20:26
  Speaker 3: the stage.
• 20:27
  Speaker 1: This is the key.
• 20:28
  Speaker 3: Yes it does, Yes it does.
• 20:30
  Speaker 1: Why does it matter The company still exists, It's just
• 20:33
  Speaker 1: listed somewhere else. This is just paper pushing. Who cares?
• 20:36
  Speaker 3: And the answer to that is, effectively, what you get
• 20:39
  Speaker 3: is the company will morph into the location that it
• 20:44
  Speaker 3: is quoted in because you're then doing your fundraisings over there,
• 20:49
  Speaker 3: You're probably going to be basing yourselves over there. If
• 20:51
  Speaker 3: you're employing people, you'll probably employ them over there. So effectively,
• 20:54
  Speaker 3: what happens is high value jobs transfer to an overseas market,
• 20:59
  Speaker 3: and the whole ecosystem that surrounds these companies moves outside
• 21:05
  Speaker 3: the UK. And when not talk about ecosystem, this is
• 21:07
  Speaker 3: talking about lawyers and accountants and auditors and actorists and bankers.
• 21:13
  Speaker 3: The whole ecosystem moves over to a different market and
• 21:18
  Speaker 3: so we lose a huge amount of tax revenue every
• 21:22
  Speaker 3: single time it happens. And that is the crime shame.
• 21:25
  Speaker 3: And when you look at some of our great companies
• 21:27
  Speaker 3: that are going and listing over in the States, and
• 21:29
  Speaker 3: they look at ARM that is obviously has grew up
• 21:32
  Speaker 3: in the UK then was zoned by SoftBank now is
• 21:34
  Speaker 3: on the US market. That effectively is yes, people can
• 21:38
  Speaker 3: invest in that, but the reality is it's taking money
• 21:41
  Speaker 3: away from the UK. And so I think about it
• 21:44
  Speaker 3: from a UK GDP, UK employment, UK tax revenue. Why
• 21:49
  Speaker 3: has the UK economy been so moribund for the last
• 21:53
  Speaker 3: fifteen years? Why is the US economy outperforming US the
• 21:57
  Speaker 3: whole time? It's these sorts of things that are actually
• 22:00
  Speaker 3: driving that.
• 22:01
  Speaker 1: So we lose the whole ecosystem. Because I can actually
• 22:04
  Speaker 1: hear some of our listeners shouting at the podcast we
• 22:07
  Speaker 1: don't need the lawyers who cares about them, etc. Which
• 22:10
  Speaker 1: is rather similar to when people say the non doms
• 22:12
  Speaker 1: let them go, without thinking about the ecosystem that it
• 22:15
  Speaker 1: comes with them and about the tax revenue that it
• 22:17
  Speaker 1: comes from that system.
• 22:19
  Speaker 3: Exactly where does all the money come from to fund
• 22:22
  Speaker 3: our national health Service and our police and our defenses.
• 22:26
  Speaker 3: It comes from people generating income and they need to
• 22:29
  Speaker 3: be employed, and if they're employed in the UK, they
• 22:32
  Speaker 3: pay tax in the UK. If they're employed in the States,
• 22:35
  Speaker 3: they pay tax in the States.
• 22:36
  Speaker 1: Okay, so healthy capital markets are a major part of
• 22:40
  Speaker 1: democratic capitalism and a major part of a healthy economy.
• 22:43
  Speaker 1: So well, we accept that. We'll put that to one side. Now,
• 22:46
  Speaker 1: let's look at the market as a whole. Let's talk
• 22:50
  Speaker 1: about valuation. Let's talk about just how cheap this is
• 22:54
  Speaker 1: made the UK market relative to other markets around the world.
• 22:57
  Speaker 1: This is something that you and I have been talking
• 22:59
  Speaker 1: about for a long time. John and I have been
• 23:00
  Speaker 1: talking about it for a long time, and interestingly, other
• 23:04
  Speaker 1: people are beginning finally to pick up on. We have
• 23:07
  Speaker 1: a bit of report out from Goldman's earlier this week,
• 23:09
  Speaker 1: so the last week, relatively recently anyway, by pointing out
• 23:12
  Speaker 1: just how cheap their forty two fifty years, and we've
• 23:14
  Speaker 1: had similar things from a couple of the other American institutions.
• 23:17
  Speaker 1: It's beginning to be noticed because it really is so cheap.
• 23:21
  Speaker 3: Right, Yeah, and it's cheap, but does anyone care? And
• 23:24
  Speaker 3: we've seen lots of reports saying it's cheap, but the
• 23:27
  Speaker 3: reality is it doesn't change anything, and we maybe can
• 23:30
  Speaker 3: come onto some solutions for this.
• 23:32
  Speaker 1: Yeah, I'm now let's talk about the gess.
• 23:35
  Speaker 2: Yeah.
• 23:36
  Speaker 3: When I'm talking to overseas investors, they all go, it's
• 23:38
  Speaker 3: really cheap. I've got I'd love to buy the UK market,
• 23:41
  Speaker 3: but it never goes up. I'm not buying a market
• 23:43
  Speaker 3: that doesn't go up. I want to buy a market
• 23:45
  Speaker 3: that goes up. And so many investors are momentum players.
• 23:48
  Speaker 3: They buy things that have already gone up and carry
• 23:50
  Speaker 3: on going up. And the UK market is a classic
• 23:53
  Speaker 3: example of a value market that isn't going anywhere, and
• 23:57
  Speaker 3: so they just feel that it's a valuation trap. How
• 24:00
  Speaker 3: cheap is it. It's probably twenty twenty five percent cheap.
• 24:04
  Speaker 3: So there's a massive value gap. Our market overall is
• 24:07
  Speaker 3: worth two and a half trillion. Twenty percent of that
• 24:10
  Speaker 3: is what five hundred billion. It's a huge amount of
• 24:13
  Speaker 3: value that is missing. And how can we validate that?
• 24:18
  Speaker 3: You can actually look at what's happening in real life,
• 24:21
  Speaker 3: is that so many of our companies are being acquired
• 24:25
  Speaker 3: and they're being acquired by private equity, they're being acquired
• 24:28
  Speaker 3: by UK companies, and they're being acquired by overseas companies.
• 24:32
  Speaker 3: If you take last year's acquisitions alone, the premium paige
• 24:38
  Speaker 3: was fifty five percent. Fifty five percent is a very
• 24:41
  Speaker 3: large premium. That premium is normally thirty percent or so
• 24:44
  Speaker 3: thirty thirty five percent, So that just tells you exactly
• 24:48
  Speaker 3: that other parties are prepared to pay a significant premium
• 24:52
  Speaker 3: for our companies and that is continuing this year as well.
• 24:57
  Speaker 3: So undoubtedly the UK market is cheap.
• 25:00
  Speaker 1: We need a.
• 25:01
  Speaker 3: Trigger to actually realize that opportunity that is sitting there
• 25:06
  Speaker 3: waiting for investors to benefit from.
• 25:09
  Speaker 1: You think that this rise in takeovers or merger and
• 25:12
  Speaker 1: acquisition activity in itself would be something of a trigger
• 25:15
  Speaker 1: because if domestic investors and international investors look across to
• 25:19
  Speaker 1: a market where the premiums on takeouts of that high
• 25:23
  Speaker 1: that you would think might in itself move them to
• 25:27
  Speaker 1: think well by some of that as well as John
• 25:29
  Speaker 1: and I keep saying in our columns and on this podcast,
• 25:32
  Speaker 1: if you don't buy them, someone else.
• 25:34
  Speaker 3: Will, and true, your opportunity will be lost. Yeah, and
• 25:38
  Speaker 3: so why is that not happening comes back to equity
• 25:41
  Speaker 3: fund flows. So we are having money taken out of
• 25:44
  Speaker 3: equity funds in the UK every single month. So if
• 25:48
  Speaker 3: a company gets taken out, that puts a bit of
• 25:51
  Speaker 3: cash back in and that partially offsets some of that
• 25:53
  Speaker 3: equity fund flows. So what we need to see for
• 25:57
  Speaker 3: the UK market to start turbo charge is equity fund inflows,
• 26:03
  Speaker 3: not outflows.
• 26:04
  Speaker 1: Okay. One of the things that we are saying that
• 26:06
  Speaker 1: again I keep thinking, is going to be a catalyst,
• 26:08
  Speaker 1: this is going to turn around, this is going to
• 26:10
  Speaker 1: make it happen, is the rise in buybacks, right, because
• 26:13
  Speaker 1: that's the companies themselves putting money into the market. That
• 26:15
  Speaker 1: we have seen over the last year or so sharp
• 26:18
  Speaker 1: rise in the number of companies across the UK market
• 26:21
  Speaker 1: doing buy back saying Okay, my shares are that cheap,
• 26:23
  Speaker 1: and then you lot won't buy them, We'll just buy
• 26:25
  Speaker 1: them ourselves. And that feels like it should at some
• 26:28
  Speaker 1: point reach the kind of momentum that could create a catalyst.
• 26:32
  Speaker 3: Yeah, and I think there is a little It's not enough,
• 26:35
  Speaker 3: that's the answer.
• 26:36
  Speaker 2: It's not enough.
• 26:36
  Speaker 3: And take the banks. The UK banks are seriously cheap.
• 26:40
  Speaker 3: They're doing huge buybacks. So what they're effectively being used
• 26:43
  Speaker 3: for these buybacks is cash machines for equity investors. And
• 26:48
  Speaker 3: if you're running an equity fund and you're a portfolio manager,
• 26:52
  Speaker 3: then every single day, if you're seeing outflows from your fund,
• 26:55
  Speaker 3: you need to be able to sell something to effectively
• 26:59
  Speaker 3: enable you to give that money back again. So how
• 27:02
  Speaker 3: you do that is effectively by having an acquisition in
• 27:06
  Speaker 3: your portfolio or by share buybacks, which the companies are
• 27:10
  Speaker 3: doing now. Actually, of course it's great news in some
• 27:13
  Speaker 3: respects for these companies to be able to do share
• 27:16
  Speaker 3: buybacks because the return on that share buyback is going
• 27:18
  Speaker 3: to be really good, so it's another reason to buy
• 27:21
  Speaker 3: the UK market. But until we have that equity outflow
• 27:24
  Speaker 3: being stemmed, the shares aren't going to really perform. Okay,
• 27:29
  Speaker 3: all right, that's all I got. What are your catalysts?
• 27:32
  Speaker 3: So the catalyst, now here's the most important way. I
• 27:35
  Speaker 3: think there are a number of catalysts that can fundamentally
• 27:38
  Speaker 3: change the perspective of the UK market. We know it's cheap,
• 27:42
  Speaker 3: we know they are great businesses. We know there's going
• 27:44
  Speaker 3: to be more M and A, we know there's going
• 27:46
  Speaker 3: to be more share buybacks. But what is the essential
• 27:49
  Speaker 3: additional pieces. Some of these will take a little bit
• 27:52
  Speaker 3: of time, but some of them will be short term.
• 27:54
  Speaker 3: Now we talked about the British iSER. I think this
• 27:57
  Speaker 3: is a terrific idea because it gives an extra five
• 27:59
  Speaker 3: thousand pounds, It doesn't cost the Treasury really anything at all.
• 28:03
  Speaker 3: It's absolutely tiny, and yet it could do an enormous
• 28:07
  Speaker 3: amount of good for the UK equity capital market and
• 28:10
  Speaker 3: then the UK economy.
• 28:12
  Speaker 1: So it's really just a symbol, isn't it that it's
• 28:14
  Speaker 1: more than a simpol because very few people use their
• 28:18
  Speaker 1: twenty thousand pounds allocation all right.
• 28:20
  Speaker 3: Eight hundred thousand two, So eight hundred thousand at five
• 28:23
  Speaker 3: thousand each that's four billion. That's quite a big chunk
• 28:27
  Speaker 3: of money.
• 28:27
  Speaker 1: Moving us along a lettle.
• 28:28
  Speaker 3: It's moving, so it's not a silver bullet.
• 28:31
  Speaker 1: Yeah, you have no idea. How angry this makes some
• 28:34
  Speaker 1: of our readers and listeners. They are infuriated by the idea,
• 28:38
  Speaker 1: as they put it, that anyone should tell them where
• 28:40
  Speaker 1: and how they should invest. And we said to them,
• 28:42
  Speaker 1: no one's telling you anything. You know, have to take
• 28:45
  Speaker 1: the tax wrapper. You can put your money anyway you like.
• 28:47
  Speaker 1: We don't knock yourself out. But if you want to
• 28:50
  Speaker 1: use the UK tax wrapper financed by the UK taxpayer,
• 28:56
  Speaker 1: why should you not invest a small part of your
• 28:58
  Speaker 1: portfolio in the UK.
• 29:00
  Speaker 3: No one's asking you to invest all of your portfolio.
• 29:02
  Speaker 3: And as you say, it's utilizing a tax wrapper, and
• 29:06
  Speaker 3: it's all it's saying is put twenty percent into the UK.
• 29:09
  Speaker 3: It's not a big ask. It's an absolute, it's a
• 29:14
  Speaker 3: no brainer. It's one of those situations where it's extraordinary.
• 29:17
  Speaker 3: We have allowed ISAs to be so flexible. And you
• 29:20
  Speaker 3: remember PEPs in the days gone by, you had to
• 29:22
  Speaker 3: put them into the UK, a big chunk of it
• 29:24
  Speaker 3: into the UK. And we have just lost our minds
• 29:27
  Speaker 3: as to the power of money to drive your local economy.
• 29:32
  Speaker 1: And it's the hate mail. I mean all the hate
• 29:35
  Speaker 1: mail for this story about that moment of wreck to you, Okay,
• 29:38
  Speaker 1: fair enough, just this Okay.
• 29:40
  Speaker 3: So that's a British ISA and I think it's a
• 29:42
  Speaker 3: terrific idea. I think everyone should do it. It will
• 29:45
  Speaker 3: make a big difference if everyone does it.
• 29:48
  Speaker 1: Charles, do you think it's going to make it through
• 29:50
  Speaker 1: change of government coming? Do you think this is just
• 29:52
  Speaker 1: my yees?
• 29:53
  Speaker 3: I think what's actually really encouraging is that Labor recently
• 29:58
  Speaker 3: put out of Financial Services a really thoughtful put together
• 30:03
  Speaker 3: document and there are a few things that they said
• 30:06
  Speaker 3: in there. One they were a big believer in pension reform,
• 30:10
  Speaker 3: to they were a believer in encouraging retail investment, and
• 30:15
  Speaker 3: these combined are going to be really helpful to resuscitate
• 30:19
  Speaker 3: the UK equity market. They know there is a problem
• 30:23
  Speaker 3: in the UK equity market. They also know that there
• 30:26
  Speaker 3: is a direct linkage between the UK equity market and
• 30:29
  Speaker 3: the UK economy and UK tax revenue. So they aren't
• 30:34
  Speaker 3: it's probably too far to say they're evangelists, but they
• 30:37
  Speaker 3: get it and this is really important and so I
• 30:42
  Speaker 3: think if anything, they will go further.
• 30:45
  Speaker 1: Okay, So that's the Britalizer. You mentioned pension reform as well.
• 30:48
  Speaker 3: Yeah, pension reform. We've talked about the disastrous policies we've
• 30:51
  Speaker 3: had on pensions for the last twenty five years. We
• 30:54
  Speaker 3: can start to put it right. There is no better
• 30:57
  Speaker 3: time than now to start putting it right. Need to
• 31:00
  Speaker 3: be saving much much more. It's appalling the low level
• 31:05
  Speaker 3: of pension savings. Actually, what's even more appalling is calling
• 31:08
  Speaker 3: a divine contribution scheme a pension. It is a saving scheme.
• 31:12
  Speaker 3: It is not a pension. And we need to enable
• 31:15
  Speaker 3: people to generate a big enough pot that they actually
• 31:19
  Speaker 3: can have a decent standard of living when they're a pensioner.
• 31:21
  Speaker 3: And we are woeful now compared to what the Australians
• 31:25
  Speaker 3: should do.
• 31:25
  Speaker 1: Yeah, I'm not sure. I entirely agree with you. I'm
• 31:27
  Speaker 1: not sure it's that woeful. I have done the sums
• 31:29
  Speaker 1: on this, done the sums on this. And you know,
• 31:32
  Speaker 1: if you if you never opt out, which is a
• 31:35
  Speaker 1: keep it never opped out of order enrollment, and from
• 31:38
  Speaker 1: the first day of work your order enrolled, you have
• 31:42
  Speaker 1: your five percent, your employers three percent, and you have
• 31:44
  Speaker 1: that during a thirty five or forty year career, and
• 31:47
  Speaker 1: you make the standard long term average return of saying
• 31:49
  Speaker 1: maybe five six percent. In real terms, by the time
• 31:52
  Speaker 1: you retire, you will have a part of something in
• 31:55
  Speaker 1: the region of two hundred and fifty thousand pounds. You
• 31:57
  Speaker 1: add that to the state pension. Now, I'm not saying
• 32:00
  Speaker 1: it's luxurious. I wouldn't expect you, Charles, to live on that.
• 32:03
  Speaker 1: I'm just saying that which should create a perfectly reasonable
• 32:07
  Speaker 1: base income. And if it creates a perfectly reasonable based income,
• 32:13
  Speaker 1: which for the purposes of the state, should be an
• 32:16
  Speaker 1: amount equivalent to keeping you out of the welfare system,
• 32:21
  Speaker 1: why should the tax wrapper system incentive as you to
• 32:26
  Speaker 1: save more.
• 32:28
  Speaker 3: So, just imagine what your rental bill is going to
• 32:30
  Speaker 3: be when you finally retire in a put rents up
• 32:34
  Speaker 3: by five percent plus a year, and you'll find that, sadly,
• 32:38
  Speaker 3: your income will not go very fast. Just imagine what
• 32:42
  Speaker 3: Thames Water is going to be charging you for the
• 32:44
  Speaker 3: privilege of getting your water. Just imagine what your energy
• 32:48
  Speaker 3: bill is going to be. So many costs are going
• 32:51
  Speaker 3: to go up faster than your pension. And that is
• 32:55
  Speaker 3: the issue. Is Yes, your pension in today's money may
• 32:59
  Speaker 3: look good in twenty years time. I'm afraid it's going
• 33:02
  Speaker 3: to be absolutely tiny. We need to save more as
• 33:05
  Speaker 3: a country, and whether that's a combination of the companies
• 33:09
  Speaker 3: putting in more money into the pension pot or individuals
• 33:12
  Speaker 3: doing so, we have got to put more money in
• 33:16
  Speaker 3: so that that is.
• 33:17
  Speaker 1: Going to come back to this and another podcast, a.
• 33:19
  Speaker 3: Whole podcast on brilliance will come back to Yes, I
• 33:22
  Speaker 3: think a lot more than we currently do is the answer.
• 33:25
  Speaker 3: And what's more, if we put more money into our
• 33:28
  Speaker 3: pensions and actually some of that money went into the
• 33:31
  Speaker 3: UK equity market, will then turbo charge the equity market,
• 33:35
  Speaker 3: which will then improve the UK economy. And part of
• 33:38
  Speaker 3: the reason the UK economy has done so badly over
• 33:40
  Speaker 3: the last decade is because the equity market has done badly,
• 33:44
  Speaker 3: and just more cash going in is great. What we
• 33:47
  Speaker 3: also need is the pensions we put our money in
• 33:50
  Speaker 3: people to actually know what they go into. And what
• 33:53
  Speaker 3: is appalling is that most people have literally no idea.
• 33:57
  Speaker 3: Most people have no idea what the size that their
• 34:00
  Speaker 3: pension is going to be because they're not given the information.
• 34:05
  Speaker 3: And also they're going to be retiring into a country
• 34:09
  Speaker 3: that economic growth has been unbelievably pedestriate and that's what
• 34:14
  Speaker 3: the situation is at the moment. We have to do
• 34:17
  Speaker 3: something about that. And the problem is we've got no
• 34:20
  Speaker 3: capital going into supporting UK companies. So you look at
• 34:25
  Speaker 3: our largest workplace pension scheme, NEST. It's a very good product.
• 34:29
  Speaker 3: It's twelve million people, it's thirty seven billion of assets.
• 34:35
  Speaker 3: There you can get some great performance. And you probably noted.
• 34:38
  Speaker 3: I'm sure that the Sharrier Fund is the best performing fund,
• 34:42
  Speaker 3: up one hundred and sixteen percent over the last five years.
• 34:45
  Speaker 3: I forget the precise number, but the Lower Growth Fund
• 34:49
  Speaker 3: really lives up to its name. It's delivered single digit
• 34:52
  Speaker 3: growth over the last five years. So that alone tells
• 34:56
  Speaker 3: you everything you need to know about how poor where
• 35:00
  Speaker 3: our investment market is. How many people know why the
• 35:03
  Speaker 3: Sharrier Fund does so well? Guess what it's inequities anyway.
• 35:07
  Speaker 3: The point is you cannot tell from the NEST scheme
• 35:12
  Speaker 3: how much of your money is being put into the UK.
• 35:15
  Speaker 3: You do not know. Comparing contrast with Australia, the Australia
• 35:19
  Speaker 3: Superfund they put twenty three percent of all their contributions
• 35:26
  Speaker 3: go into Australian equities. The Australian equity market is pretty small,
• 35:31
  Speaker 3: but a big portion of their pension fund goes in.
• 35:34
  Speaker 3: Guess what that actively drives employment, GDP growth, tax revenues
• 35:41
  Speaker 3: And they work out it's not rocket science. They work
• 35:44
  Speaker 3: out all of those people paying into those schemes are
• 35:47
  Speaker 3: goin to retire in Australia. Do they want to live
• 35:49
  Speaker 3: in a country where the tax base is so low
• 35:53
  Speaker 3: they can't afford a health service, they can't afford a
• 35:55
  Speaker 3: police force, they can't afford defense. I as a taxpayer,
• 35:59
  Speaker 3: want to live in a country where we grow our
• 36:01
  Speaker 3: GDP and we can afford all these things, and yet
• 36:03
  Speaker 3: the way we're going, we're not going to be able to.
• 36:06
  Speaker 1: So how much what percentage of pension fund the assets
• 36:09
  Speaker 1: across the UK? It was you mandate to invest in
• 36:13
  Speaker 1: UK equities? It's a good question.
• 36:16
  Speaker 3: I haven't come up with an answer to that, but
• 36:19
  Speaker 3: you can see that a number if you look at
• 36:21
  Speaker 3: the hard Grease Landsdown portfolio is there now typically around
• 36:24
  Speaker 3: ten percent. I think that's load. Personally, I think it
• 36:27
  Speaker 3: should be fifteen to twenty as a sensible level, because
• 36:30
  Speaker 3: then you are getting the snowball effect of more money
• 36:34
  Speaker 3: going into the UK. You'll get more company formation, you
• 36:37
  Speaker 3: get more investment will grow, our economy will attract overseas investment,
• 36:43
  Speaker 3: and our equity market will also go up, and that
• 36:45
  Speaker 3: creates wealth, that creates more opportunities. So if we start today,
• 36:52
  Speaker 3: then we can turn this round in five to ten
• 36:56
  Speaker 3: years time.
• 36:58
  Speaker 1: We're going to get quite a lot of emails from
• 37:00
  Speaker 1: the financial repression people. So let's move on, which I approved,
• 37:04
  Speaker 1: by the way, not financial repression, but the analysis of
• 37:07
  Speaker 1: Let's move on to the other potential catalyst that we've
• 37:12
  Speaker 1: talked about before. And I said earlier, that's all the
• 37:14
  Speaker 1: ideas I've got, but you and I both agree. I
• 37:16
  Speaker 1: think that reducing or abolishing stamp duty on UK equity
• 37:20
  Speaker 1: training would be a really great way forward. We have
• 37:22
  Speaker 1: one of the highest, in fact, possibly not quite the
• 37:24
  Speaker 1: highest island higher isn't it really second second highest?
• 37:28
  Speaker 3: And I'm sure what happened in the Irish market. Have
• 37:31
  Speaker 3: you seen the Irish market? How many companies are leaving
• 37:34
  Speaker 3: the Irish market. They've made an absolute disastrous situation in Ireland,
• 37:39
  Speaker 3: worse by that one percent stamp duty, utter madness, madness.
• 37:43
  Speaker 1: So there was half a percent, we're half a percent. Well,
• 37:46
  Speaker 1: we're the next on the list, the next highest yeah.
• 37:49
  Speaker 3: And who could imagine that we would actually be uncompetitive
• 37:53
  Speaker 3: with France. France they don't charge any stamp duty on
• 37:58
  Speaker 3: smaller companies. They charge point three percent on larger companies.
• 38:02
  Speaker 3: It is banignas. And of course in the US and
• 38:06
  Speaker 3: in Germany they don't charge stamp duty. So effectively, we
• 38:09
  Speaker 3: are saying to investors at the moment, no, be patriotic,
• 38:13
  Speaker 3: put your money into the UK, and by the way,
• 38:15
  Speaker 3: pay tax on it. Go and buy Nvidia and ARM
• 38:19
  Speaker 3: now it's a US company, and don't pay tax.
• 38:22
  Speaker 1: I wrote a column on this a while back, and
• 38:24
  Speaker 1: I thought it was one of those niche subjects and
• 38:28
  Speaker 1: lots of people would either ignore it, and anyone who
• 38:30
  Speaker 1: didn't ignore it would send me email saying, don't be ridiculous, Maren,
• 38:33
  Speaker 1: this is marginal, it's nothing. But that's not what I got.
• 38:37
  Speaker 1: I actually got an inbox full of emails saying, yeah,
• 38:39
  Speaker 1: this is why we don't invest in the UK. And there.
• 38:41
  Speaker 3: I can bore on for really quite some time about
• 38:43
  Speaker 3: stamp duty. But what really makes me mad is when
• 38:46
  Speaker 3: you see things from the Treasury say that stamp duty
• 38:49
  Speaker 3: raises billions for the UK and has no impact on markets.
• 38:53
  Speaker 3: Do not understand how markets operate, because it has to
• 38:57
  Speaker 3: have an impact. That's what tax does. It impacts everything.
• 39:01
  Speaker 3: So it is undoubtedly having a detrimental impact on our market.
• 39:06
  Speaker 3: Removing it would have a benefit, and at the very
• 39:10
  Speaker 3: very least they should one hundred percent get rid of
• 39:12
  Speaker 3: it on small and MidCap companies. And why because in
• 39:17
  Speaker 3: five years time that will go to zero and the
• 39:20
  Speaker 3: reality is we will not have a smaller MidCap sector
• 39:23
  Speaker 3: because it will have been acquired by everyone else over
• 39:26
  Speaker 3: the next five years. And that is not an exaggeration
• 39:29
  Speaker 3: I put into a piece I wrote recently that the
• 39:32
  Speaker 3: small cap market would have gone by twenty twenty eight
• 39:34
  Speaker 3: and that is the current trajectory based on the last
• 39:38
  Speaker 3: year of departures from the UK market. Now, obviously I'm
• 39:44
  Speaker 3: more than hoping that is not going to be the
• 39:46
  Speaker 3: case because we have a number of measures that move
• 39:50
  Speaker 3: the valuation structure of the UK market bring inward investments,
• 39:53
  Speaker 3: whether it's pension reform or a British ice or stamp duty.
• 39:58
  Speaker 3: We can turn this round really quick to the benefit
• 40:00
  Speaker 3: of all UK citizens. No, you could add twenty five
• 40:04
  Speaker 3: percent to the UK market within a year by doing
• 40:07
  Speaker 3: things that do not cost the British taxpayer, very much
• 40:10
  Speaker 3: money at all to the benefit of the economy and
• 40:14
  Speaker 3: everyone living in the UK. Now, we may well have
• 40:17
  Speaker 3: a change of government over the next nine months or
• 40:20
  Speaker 3: so maybe, and that obviously is going to have an
• 40:24
  Speaker 3: opportunity for a rethink on all sorts of different things.
• 40:28
  Speaker 3: And as I mentioned earlier, the Labor Financial Services Review
• 40:31
  Speaker 3: I thought was very thought provoking, a very clear document
• 40:35
  Speaker 3: that they understand the problem and they're looking at solutions.
• 40:38
  Speaker 3: Stamp duty is one of the solutions, and I really
• 40:41
  Speaker 3: urged them to look at it really seriously. It raises
• 40:44
  Speaker 3: a small amount of money, a declining amount of money,
• 40:47
  Speaker 3: and if we effectively invested that in our economy and
• 40:52
  Speaker 3: our stock market, then we would get a very big
• 40:56
  Speaker 3: return on it because we'd actually start to resuscitate a
• 40:59
  Speaker 3: crucial part of our economy.
• 41:01
  Speaker 1: Okay, that sounds great, and there'll be a lot of
• 41:03
  Speaker 1: small cup fund managers out there in the UK really
• 41:06
  Speaker 1: hoping that's what happens too, right O, Yes, let's move on.
• 41:10
  Speaker 1: I mentioned small cup fund managers because the listeners to
• 41:14
  Speaker 1: this podcast are in the main not fund managers. They're
• 41:18
  Speaker 1: in the main ordinary investors. And the wonderful thing about
• 41:22
  Speaker 1: being an ordinary investor is that no one's judging you.
• 41:25
  Speaker 1: You don't have to show your portfolio to any bodley.
• 41:27
  Speaker 1: Nobody knows what's in there, and unlike a fund manager,
• 41:31
  Speaker 1: you're not being judged every quarter. No league tables, no benchmarks,
• 41:35
  Speaker 1: no relative muttering, no desperately trying to get your performance.
• 41:38
  Speaker 1: For all that stuff not out there, you can buy value,
• 41:42
  Speaker 1: and you can wait. Sometimes it's a long wait to accept.
• 41:45
  Speaker 1: It was a long wait in Japan, and it might
• 41:47
  Speaker 1: be a longer wait than one would like here. But nonetheless,
• 41:50
  Speaker 1: if you are the kind of investor who believes that
• 41:53
  Speaker 1: the price you pay is a big part of the
• 41:55
  Speaker 1: return you get over the medium to long term, and
• 41:58
  Speaker 1: you want to be in the un and you're not
• 42:00
  Speaker 1: showing your portfolio to anybody, what should you buy?
• 42:05
  Speaker 3: Do you buy the market? It's really easy, buy anything,
• 42:08
  Speaker 3: buy anything.
• 42:09
  Speaker 2: No.
• 42:09
  Speaker 3: You get a four percent dividend yield by buying the market.
• 42:12
  Speaker 3: You don't get much more than that by sticking it
• 42:15
  Speaker 3: in a bank. Actually you don't get as much as
• 42:17
  Speaker 3: that in most banks, and you have to go into
• 42:19
  Speaker 3: sort of higher yield products and guilts that will be
• 42:23
  Speaker 3: briefly above that. But you buy the market, you get
• 42:26
  Speaker 3: a four percent dividend yield forever and the capital growth
• 42:30
  Speaker 3: effectively is your upside. And we've already discussed the UK's
• 42:34
  Speaker 3: twenty twenty five percent discounted compared to global markets. That
• 42:38
  Speaker 3: will change one day. It has to change, and either
• 42:41
  Speaker 3: it'll change because the equity market goes up naturally, it'll
• 42:44
  Speaker 3: change because all the companies get acquired or they go
• 42:46
  Speaker 3: unless elsewhere. So you're being paid some really nice income
• 42:52
  Speaker 3: just to be patient. So I think it's a really
• 42:55
  Speaker 3: easy one at the moment. And then within that, if
• 42:59
  Speaker 3: you want to be more specific, you can look at
• 43:02
  Speaker 3: the UK sectors because actually I'm a believer in the
• 43:04
  Speaker 3: UK economy. I think we can do so much more
• 43:07
  Speaker 3: than we're currently doing, and hopefully that will take place.
• 43:10
  Speaker 3: But actually we've got some great businesses in the UK
• 43:13
  Speaker 3: that are performing well and are really cheap. You look
• 43:16
  Speaker 3: at some of our contractors, the banks are really cheap.
• 43:19
  Speaker 3: They're buying their shares back because they think they're really cheap.
• 43:23
  Speaker 3: Now go figure they are. Some of our retailers have
• 43:25
  Speaker 3: been struggling for the last couple of years because of inflation.
• 43:28
  Speaker 3: Inflation is disappearing pretty quickly, they're going to fare a
• 43:32
  Speaker 3: lot better. So there are so many companies you can
• 43:34
  Speaker 3: buy that are going to pay you a really good
• 43:37
  Speaker 3: return for just being patient.
• 43:40
  Speaker 1: Okay, Oh, go on, give us some names.
• 43:42
  Speaker 3: Go on, Wow, okay, some names. If you're looking at
• 43:45
  Speaker 3: the banks, there's Lloyds and were Store. Obvious, those are
• 43:48
  Speaker 3: both really good quality businesses. Trading well. You look at retailers,
• 43:52
  Speaker 3: You've got Next is a fantastic business. You look at contractors,
• 43:56
  Speaker 3: the likes of Care and gallaher Try a great businessiness
• 44:00
  Speaker 3: is you look in the consumer space their companies like
• 44:03
  Speaker 3: Premier Foods that's got some great brands. And I can
• 44:06
  Speaker 3: go on on there're loads of good companies.
• 44:07
  Speaker 1: And you what about the big oil companies and reflightly
• 44:09
  Speaker 1: on Nose speaks with Shelle. Aren't we with them muttering
• 44:11
  Speaker 1: about moving abroad?
• 44:13
  Speaker 3: To be honest, I applaud their honesty because the reality
• 44:16
  Speaker 3: is they are running at a competitive disadvantage to their
• 44:20
  Speaker 3: global peers. They should be on the similar valuation metrics
• 44:25
  Speaker 3: as global peers. And if we're getting a discount because
• 44:29
  Speaker 3: you're in Europe or in you're in the UK, it's
• 44:31
  Speaker 3: whether it's an ESG discount or it's a fun flow
• 44:35
  Speaker 3: discount that is a fundamental problem. Not obviously it would
• 44:39
  Speaker 3: be disastrous for the UK market if they left, because
• 44:42
  Speaker 3: that would be a massive blow of confidence to the
• 44:45
  Speaker 3: UK equity market and other companies would follow, and I'm
• 44:49
  Speaker 3: sure the government of the day would take that incredibly seriously.
• 44:53
  Speaker 3: Maybe the later a fair attitude to markets would fundamentally shift,
• 44:57
  Speaker 3: But that as it may, I think raising the flag
• 45:01
  Speaker 3: that there's an issue here is really important.
• 45:04
  Speaker 1: Okay, what about small caps. You were just saying that
• 45:08
  Speaker 1: if things carry on the way they are, the small
• 45:11
  Speaker 1: UK small caps we've basically gone by twenty twenty eight.
• 45:14
  Speaker 1: Now if that were the case, if that happened and
• 45:17
  Speaker 1: they were all taken out at a fifty percent plus premium, wow,
• 45:22
  Speaker 1: we'd be really upset about the UK, right, that would
• 45:24
  Speaker 1: be the end of the UK economy. But what an
• 45:25
  Speaker 1: amazing return you'd make over a four or five year period.
• 45:28
  Speaker 3: Correct, And that is the opportunity. And so five years
• 45:33
  Speaker 3: ago there were one hundred and sixty companies I'm excluding funds,
• 45:36
  Speaker 3: one hundred and sixty companies were in the UK small
• 45:39
  Speaker 3: Cap index. Today one hundred and thirteen already thirteen of
• 45:45
  Speaker 3: those again to disappear over the next year or so,
• 45:49
  Speaker 3: so you can see the trajectory is pretty clear and
• 45:52
  Speaker 3: we need to refill the hopper. What we have to
• 45:55
  Speaker 3: do is create an environment that companies want to list
• 45:59
  Speaker 3: in and want to stay listed in, and loads of
• 46:02
  Speaker 3: companies that we speak to question why they are quoted.
• 46:05
  Speaker 3: And that's why so many of these acquisitions are happening
• 46:08
  Speaker 3: is because you've got a willing buyer because of the valuation.
• 46:11
  Speaker 3: You've got a willing seller because they're going The equities
• 46:13
  Speaker 3: market's no longer working for me. So we need to
• 46:17
  Speaker 3: change the dynamic. And there are some regulatory reforms that
• 46:20
  Speaker 3: we are positive on and feel will help. But it's
• 46:24
  Speaker 3: not the regulatory reforms that are going to make the change.
• 46:27
  Speaker 3: It's the fun flows, it's the valuations, and it's the
• 46:30
  Speaker 3: dynamic around capital and growth and creation of savings. In
• 46:34
  Speaker 3: the UK. We need to be supporting our entrepreneurs rather
• 46:38
  Speaker 3: than kicking them, and I think that there is a
• 46:40
  Speaker 3: change in mentality going on. It needs to accelerate. Hopefully
• 46:45
  Speaker 3: the media can support this so that actually we start
• 46:50
  Speaker 3: to recognize that people who create jobs, create wealth, generate
• 46:54
  Speaker 3: tax revenues are good for the UK. That is a
• 46:57
  Speaker 3: fundamentally important point that sadly has been lacking over recent years.
• 47:04
  Speaker 1: I'm one other part of the media is on your
• 47:06
  Speaker 1: side a great one.
• 47:07
  Speaker 3: Other point is there's been a session with private markets,
• 47:11
  Speaker 3: and private markets have done really well over fifteen years. Now.
• 47:15
  Speaker 3: Guess what that's coincide very neatly with a period of
• 47:19
  Speaker 3: ultra low interest rates.
• 47:21
  Speaker 1: Charles, come on, now, what has happened here is the
• 47:24
  Speaker 1: private equity managers are way better at managing stuff than
• 47:28
  Speaker 1: anybody else anywhere. And the fact that debt has been
• 47:31
  Speaker 1: practically free, it has got nothing to do with it.
• 47:33
  Speaker 1: And I know this because they keep telling me.
• 47:36
  Speaker 3: Now, Marion, you can't catch me on that one. I
• 47:38
  Speaker 3: think lots of them are terrific, and that they are
• 47:41
  Speaker 3: brilliant managers, and they are very good at turning around
• 47:45
  Speaker 3: certain situations outside the gaze of the public markets, and
• 47:49
  Speaker 3: they some of them are very good at investing. But
• 47:52
  Speaker 3: it is totally undeniable that they have had a free pass.
• 47:57
  Speaker 3: They've got the golden ticket because of ultralow interest and unfortunately,
• 48:01
  Speaker 3: with government has looked at that and gone, oh god,
• 48:04
  Speaker 3: that's clever. Let's put our local government pension schemes into
• 48:08
  Speaker 3: that let's do a mansion house compact that says, let's
• 48:11
  Speaker 3: put more money into private capital. Add exactly the time
• 48:14
  Speaker 3: when interest rates go up, it's bonkers, and.
• 48:16
  Speaker 1: Exactly the time when listed markets really need them, and.
• 48:19
  Speaker 3: Also totally missing the point that there is a public
• 48:23
  Speaker 3: good with listed markets. And what I mean by that
• 48:26
  Speaker 3: is that companies in the full glare of publicity tend
• 48:31
  Speaker 3: to behave better and they have annoying analysts like me.
• 48:35
  Speaker 3: They have annoying journalists not mentioning any names. We poke
• 48:38
  Speaker 3: and prod them the whole time. We check what they're doing,
• 48:41
  Speaker 3: We question them, we call them out. We'd say that
• 48:44
  Speaker 3: doesn't look a good strategy, or you need to do
• 48:46
  Speaker 3: better here. Look at the issues that loads of companies
• 48:49
  Speaker 3: have had from a sustainability or whatever it is. The
• 48:52
  Speaker 3: full spotlight on public companies is a public good. Guess what,
• 48:56
  Speaker 3: when you are private, you get almost none of that.
• 49:00
  Speaker 3: Would Thames Water have happened if that had been a
• 49:03
  Speaker 3: public company, I doubt they would never have been allowed
• 49:06
  Speaker 3: to leverage to the extent they did. Would the Post
• 49:08
  Speaker 3: Office have had the appalling situation of the last decade,
• 49:13
  Speaker 3: the last twenty years if an analyst that is writing
• 49:16
  Speaker 3: on that company, they would be saying, you need to
• 49:19
  Speaker 3: be making a massive provision for a massive problem that
• 49:22
  Speaker 3: is of your own creation. So there is a public
• 49:25
  Speaker 3: good for public markets. Now, it's not perfect. There will
• 49:28
  Speaker 3: always be Charlatan's. There will always be companies that make
• 49:31
  Speaker 3: strategic missteps. But these things are called out a lot faster.
• 49:37
  Speaker 3: What's more, public companies actually pay tax and their structure
• 49:42
  Speaker 3: is not set up with one of the main aims
• 49:45
  Speaker 3: to avoid paying corporation tax. So guess what, they pay
• 49:48
  Speaker 3: a lot more tax revenue than private companies. So the
• 49:51
  Speaker 3: whole thrust towards private market's totally mad.
• 49:56
  Speaker 1: Yeah, let's have more LI listed companies. Excellent, correct, before
• 49:59
  Speaker 1: we go, we always ask the same question at the end,
• 50:02
  Speaker 1: and I have to ask you as well. Ten year period,
• 50:04
  Speaker 1: you've got to have one of these assets. Maybe assets
• 50:07
  Speaker 1: is the wrong word. Would it be gold or would
• 50:09
  Speaker 1: it be bitcoin?
• 50:12
  Speaker 3: I don't understand bitcoin enough, so it has to be gold.
• 50:15
  Speaker 1: Okay, welcome to the club.
• 50:16
  Speaker 3: Thank you very much, child, Thanks very much, man.
• 50:18
  Speaker 1: Thanks for your time. John. You're listening to that chat?
• 50:28
  Speaker 1: Is there anything in there that you listen to and
• 50:30
  Speaker 1: you thought to yourself. God, that child he's an idiot.
• 50:33
  Speaker 1: I wouldn't agree with.
• 50:34
  Speaker 2: That, unfortunately not I prefer it when I could find something.
• 50:41
  Speaker 2: But it's very hard to disagree with any of the
• 50:45
  Speaker 2: points that Child's is making. I mean, there is one
• 50:51
  Speaker 2: thing that I suspect some of our reader's enemy her listeners,
• 50:56
  Speaker 2: some of the lesters might have qualms about. And I
• 50:58
  Speaker 2: think that you both mentioned this out of the team,
• 51:02
  Speaker 2: but this this sort of a can that it's protectionist
• 51:06
  Speaker 2: in some way or even financial recreation to be seeing
• 51:10
  Speaker 2: we are people should be put in the money if
• 51:14
  Speaker 2: they want to get the tax break. I think that's
• 51:16
  Speaker 2: one of the few things that will have let's not
• 51:19
  Speaker 2: showing that the podcast metal.
• 51:21
  Speaker 1: Yeah, I agree, and it's one of those things that
• 51:23
  Speaker 1: people look at and they go, you know, this is
• 51:24
  Speaker 1: a kind of financial nationalism. There is a protectionism, this
• 51:28
  Speaker 1: is repression, etc. And you know, to a degree, I
• 51:31
  Speaker 1: suppose it is. It's an attempt to start directing where
• 51:34
  Speaker 1: money goes. But on the other hand, if it is
• 51:37
  Speaker 1: only applicable to money on which you have received a
• 51:41
  Speaker 1: tax benefit, it was only money inside a rapid, then
• 51:45
  Speaker 1: I can't see the problem with that. If no one
• 51:48
  Speaker 1: is saying to you, money on which you're paying normal taxes,
• 51:51
  Speaker 1: you can do whatever you want with that, totally up
• 51:54
  Speaker 1: to you. But if it's money that has been you know,
• 51:59
  Speaker 1: in a hant buy a tax rapper, then possibly other taxpayers,
• 52:04
  Speaker 1: the state should have some say over where you can
• 52:07
  Speaker 1: or can't invest it. Now. I'm much more comfortable on
• 52:10
  Speaker 1: that with isis because everyone understands ices. It's very much
• 52:14
  Speaker 1: a choice people understand than an ISO. An ISA is
• 52:16
  Speaker 1: a rapper, not a thing in itself, etc. I'm more
• 52:19
  Speaker 1: comfortable with it there. I think we can expect people
• 52:23
  Speaker 1: to understand how that works. I'm slightly less comfortable with
• 52:26
  Speaker 1: it on the pension side because pensions are such a
• 52:29
  Speaker 1: black box for people, you know, so there's so many
• 52:32
  Speaker 1: people A pension is a thing, it's not a rapper
• 52:35
  Speaker 1: inside which there are investments, and I think so I
• 52:37
  Speaker 1: do think there's a comprehension gap there. So I'm slightly
• 52:40
  Speaker 1: less comfortable with it when it comes to pensions because
• 52:43
  Speaker 1: I think there the state has much more ability to
• 52:46
  Speaker 1: direct where money goes without their being full transparency. And
• 52:52
  Speaker 1: I'm also uncomfortable with it because a lot of the
• 52:54
  Speaker 1: conversation around it has been about investing in private companies
• 52:58
  Speaker 1: as opposed to public companies, and like, I'm super super
• 53:01
  Speaker 1: pro public companies over private companies. I want to see
• 53:04
  Speaker 1: that transparency. I'm very great believer in sholder democracy, and
• 53:07
  Speaker 1: i want to see people being able to challenge corporates
• 53:11
  Speaker 1: for all sorts of reasons. So I'm less comfortable with
• 53:14
  Speaker 1: this idea that there's more growth available for the pensions
• 53:18
  Speaker 1: industry if they are directed by the state to invest
• 53:21
  Speaker 1: in unlisted companies. That makes me feel little nervous.
• 53:24
  Speaker 2: DE mean, I think that's a really good point. I mean,
• 53:28
  Speaker 2: that's just the thing is that, and that sort of
• 53:30
  Speaker 2: leads to the other thing that Child's was talking about.
• 53:33
  Speaker 2: I mean, the dB pension funds are already basically subject
• 53:37
  Speaker 2: to allocation by the state, and that's why they all
• 53:41
  Speaker 2: hold guilts basically rather than kind of massive equities. So
• 53:47
  Speaker 2: it can also about wretched to complain about the idea
• 53:50
  Speaker 2: that a little bit of money may be diverted tax
• 53:55
  Speaker 2: efficiently towards u key equities whilst ignoring the fact that
• 53:58
  Speaker 2: there's this it'dential way kind of compulsory a bit for
• 54:03
  Speaker 2: guilts by the kind of defined benefit pension funds.
• 54:08
  Speaker 4: But I mean, that's what The other thing about the
• 54:12
  Speaker 4: private assets issue is that I don't know, I'm cursing
• 54:16
  Speaker 4: what you think about this, but I get the impression
• 54:18
  Speaker 4: there's just a lot of I don't know if it's
• 54:22
  Speaker 4: confusion or if it's lobbying, but at least part of
• 54:27
  Speaker 4: this private assets thing seems to be tied in with
• 54:30
  Speaker 4: the idea that, you know, we've become obsessed with fees
• 54:38
  Speaker 4: and costs, which is the thing that always comes up
• 54:41
  Speaker 4: in these conversations, and it's the one area where I
• 54:44
  Speaker 4: think it's bad that a lot of the focus has
• 54:47
  Speaker 4: fallen on that because one of the kind of unalloyed
• 54:51
  Speaker 4: goods of the last ten years in finance has been
• 54:55
  Speaker 4: the focus on bringing costs down.
• 54:57
  Speaker 2: And that's the last thing that we should be kind
• 55:00
  Speaker 2: of focusing on unwinding if we're going to change the
• 55:05
  Speaker 2: you know, the pension system, agreed.
• 55:08
  Speaker 1: And if you look at the private equity industry and
• 55:11
  Speaker 1: you look at the fees that I made there, and
• 55:12
  Speaker 1: you look at the amount of money that is being
• 55:14
  Speaker 1: generated there, it's hard to say because this lot couldn't
• 55:17
  Speaker 1: cope if they were to cut their fees a little bit.
• 55:20
  Speaker 2: M Yeah, exactly, And Also, the private assets thing is
• 55:26
  Speaker 2: a bit of a function of the zero interest rate world.
• 55:31
  Speaker 2: It's not like private equity didn't what God, didn't exist
• 55:34
  Speaker 2: before zero percent interest rates, but the kind of explosion
• 55:39
  Speaker 2: and those kinds of assets kind of dates back to
• 55:43
  Speaker 2: after two thousand and eight, and they kind of request
• 55:46
  Speaker 2: for yield. And I suppose we're seeing that on traveling
• 55:49
  Speaker 2: in the investment trust space right now or gradually being
• 55:55
  Speaker 2: resolved because that, you know, the Music Royalties investment trust
• 55:58
  Speaker 2: agnosis has just been borto after several kind of mindset,
• 56:04
  Speaker 2: a year of equipplent about what the value of its
• 56:07
  Speaker 2: assets actually are. And it's I mean, it's good. It's
• 56:11
  Speaker 2: good to see all that starting to get tidied up
• 56:12
  Speaker 2: because there's a lot of investment trusts a bit like
• 56:16
  Speaker 2: that that were basically launched to pervade yield and a
• 56:19
  Speaker 2: zero percent world and now really don't have I can
• 56:25
  Speaker 2: eat a basis for existing, at least not in the
• 56:28
  Speaker 2: current forms.
• 56:29
  Speaker 1: Yeah. No, And I think it's it's good to see
• 56:31
  Speaker 1: the investment trust sector begun to be cleared out. You know,
• 56:33
  Speaker 1: we both have great respect for that sector. I love
• 56:35
  Speaker 1: that sector, and I you know, I've worked in it
• 56:38
  Speaker 1: for a long time, and I write about it a lot.
• 56:39
  Speaker 1: But over the last over this very low interest rate period,
• 56:43
  Speaker 1: you've had some trusts, new trusts come into that sector
• 56:46
  Speaker 1: that don't necessarily uphold. There also the long term investment
• 56:50
  Speaker 1: strategies plus values how we like to put it, that
• 56:52
  Speaker 1: the sector is usually demonstrated. So I'm quite pleased to
• 56:55
  Speaker 1: see the beginning to be cleaned up that, you know,
• 56:57
  Speaker 1: speaking of private companies investment and in the trend towards
• 57:01
  Speaker 1: that and the disasters it can cause. Did you know
• 57:04
  Speaker 1: that Neil Woodford is making another comeback?
• 57:09
  Speaker 2: Have you seen good transition? Actually down in the record books?
• 57:15
  Speaker 1: Thank you, Thank you paid attention to mention it. And
• 57:20
  Speaker 1: I'm sure that all our listeners will know about Neil
• 57:22
  Speaker 1: Woodford and they'll they'll know about the implosion of his
• 57:25
  Speaker 1: career connect connected to investing in possibly in too many
• 57:29
  Speaker 1: private companies. But there's a lot written out there. We're
• 57:31
  Speaker 1: not going to go to that, but we will say,
• 57:33
  Speaker 1: is that I see that Neil has opened a a
• 57:36
  Speaker 1: new website. Can you open a website? Do you start
• 57:38
  Speaker 1: a website? Do you launch your website? I don't know
• 57:40
  Speaker 1: vocabulary problem? Launch you launch your website and it's called
• 57:44
  Speaker 1: Woodford Views. And there's a lot of sneering about this
• 57:46
  Speaker 1: on on Twitter slash x, of course there is. But
• 57:50
  Speaker 1: I have signed up with it because signed up to it,
• 57:52
  Speaker 1: because you know, here's a man with a long career,
• 57:54
  Speaker 1: has been through a lot of cycles and I'm quite
• 57:55
  Speaker 1: interested to see what's going to come out of that.
• 57:57
  Speaker 1: And we'll talk about it again, but in the mean time,
• 58:00
  Speaker 1: Woodford Views, if you want to hear from the man
• 58:01
  Speaker 1: who was hero and then absolutely zero and how he's
• 58:04
  Speaker 1: reflecting on that, we might see it there. He's signing up, John,
• 58:09
  Speaker 1: You're not signing up, are you.
• 58:11
  Speaker 2: I'm definitely going to say not for that. I mean,
• 58:16
  Speaker 2: the one thing that I'll say is that sometimes people
• 58:18
  Speaker 2: are good at one thing and are terrible another thing.
• 58:21
  Speaker 2: And clearly he was good at one thing, which was
• 58:23
  Speaker 2: buying big in comb stocks, and terrible another thing, which
• 58:27
  Speaker 2: was pointing tiny, little enlisted stocks. But that doesn't mean
• 58:31
  Speaker 2: he's good. Nothing to offer at this point, And thankfully
• 58:36
  Speaker 2: I didn't invest in his funds, so I don't have
• 58:39
  Speaker 2: you know, personal animus here, so.
• 58:43
  Speaker 1: I didn't either, But we might be alone among the
• 58:46
  Speaker 1: UK invest in community anyway. You know, it may be
• 58:49
  Speaker 1: that the thing that Neil Woodford originally specialized in, i e.
• 58:53
  Speaker 1: Really great UK income stocks might be about to have
• 58:56
  Speaker 1: a wonderful comeback and he'll be in exactly the right place,
• 59:00
  Speaker 1: exactly the right time.
• 59:02
  Speaker 2: Maybe the fossil fuel sector looks a lot like the
• 59:06
  Speaker 2: tobigo sector dead bike, then.
• 59:08
  Speaker 1: Yes, and he made a lot of money in the
• 59:09
  Speaker 1: tobacco sector, didn't he. I don't think that we really
• 59:12
  Speaker 1: want to end this podcast by recommending that everyone goes
• 59:14
  Speaker 1: off and by fossil fuels, because then our inbox will
• 59:17
  Speaker 1: get get too full. And speaking of the indux, here's inbox,
• 59:19
  Speaker 1: here's another here's another shift for you. Thank you very
• 59:22
  Speaker 1: much for your comments and questions. We've been getting quite
• 59:24
  Speaker 1: a few, and we hugely appreciate that, and we will
• 59:27
  Speaker 1: be answering every single one of those questions except for
• 59:30
  Speaker 1: the rude ones, over the next few weeks. Keep sending
• 59:34
  Speaker 1: them in, except for the rude ones. Thanks for listening
• 59:36
  Speaker 1: to this week's Marin Talks Money. This episode was hosted
• 59:38
  Speaker 1: by me and Maren sumset Web. It was produced by
• 59:40
  Speaker 1: some Sosiety. Additional editing by Blake Maple's Brendan Newman. Is
• 59:44
  Speaker 1: our executive producer. Sage Bauman is Head of Podcasts Focial.
• 59:48
  Speaker 1: Thanks to Charles Hall and to John Steppek. Please subscribe, rate,
• 59:52
  Speaker 1: and review wherever you listen to your podcast, and don't
• 59:54
  Speaker 1: forget to email us questions, comments, concerns and hate mail
• 59:58
  Speaker 1: to Merin Money at Bloomberg dot net. Thank you, m.