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Why Investors Should Expect Lower Returns From Here · Merryn Talks Money

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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
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Speaker 2: Welcome to Maren Tooks Money, the podcast in which people
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Speaker 2: who know the markets explain the markets.
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Speaker 3: I am Maren sumrset Web.
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Speaker 2: This week, I'm speaking with Luca Powerlini, chief strategist at
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Speaker 2: Picta Asset Management. Now, before we start, I have to
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Speaker 2: tell you that we are recording on Wednesday, May thirteenth,
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Speaker 2: late afternoon, British summer time. And I'm being this precise
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Speaker 2: because there is so much going on, so much in flux,
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Speaker 2: that by the time you listen to this, everything could
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Speaker 2: have changed. So if the UK Prime Minister Kirstamer could
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Speaker 2: have resigned, Donald Trump will have been to China, probably
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Speaker 2: have been to China. The US around standoff may have
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Speaker 2: made progress, may not have made progress, who knows.
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Speaker 3: So there's a lot.
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Speaker 2: Of possible changes between right now and publication. That said,
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Speaker 2: I still think there's a lot we can get from
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Speaker 2: Luca today. There's norful that we can talk about that
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Speaker 2: ignores there's changing issues. So Luca, welcome to talk to Money.
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Speaker 4: Nice to be here again.
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Speaker 2: Right, as I say, there is quite a lot going on.
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Speaker 2: So let's talk first about the macro environment and how
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Speaker 2: extraordinary it is really how little markets are reacting to
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Speaker 2: these sort of rolling crisis in the Middle East in particular.
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Speaker 4: Well, I think the main story here really is that
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Speaker 4: when you look also the spin of the last few years,
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Speaker 4: every shock that we're seeing globally, especially the tariffs day
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Speaker 4: and last year, especially as economy been in credibly residient,
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Speaker 4: everybody was expecting a big impact on inflation on the
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Speaker 4: liberal market. The reality is that US growth is about
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Speaker 4: two percent, even Europe is growing in a descent discent rate,
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Speaker 4: Japanese recovering, Chinese fine. So the global economy has proved
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Speaker 4: to be incredibly residient, a surprise to all of us.
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Speaker 4: But obviously the residience of the global economy also implies
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Speaker 4: that earnings are doing very well, and so looking at
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Speaker 4: the past investors prussing conclusion it doesn't really pay off
2:02
Speaker 4: to be to bet rich too soon, and that's why
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Speaker 4: I think the market continues to be very, very, very strong.
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Speaker 2: But what do you think you're driving that resilience. I mean,
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Speaker 2: you know, if you watch the news, you hear relentless
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Speaker 2: drive of negativity, for example, and you know, you look
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Speaker 2: at employment numbers and all that kind of thing, you
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Speaker 2: begin to worry that AI is eating into employment, which
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Speaker 2: is going to be a long time problem. There's an
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Speaker 2: inflationary impulse across the globe. Rates are more likely to
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Speaker 2: go up than down. All these things should be negative
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Speaker 2: for the global economy. But nonetheless, as you said, just
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Speaker 2: it's relentlessly resilient.
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Speaker 4: Why I think partly because let's not forget the AI
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Speaker 4: boom is not just you know, market prices going up,
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Speaker 4: is a real increase in investment spending that obviously drives
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Speaker 4: all the economic data high, not only in the US.
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Speaker 4: Then there is another element, which I think is important,
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Speaker 4: is an incredible creation of wealth that's been achieved the
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Speaker 4: last few years. That basically implies that people have more
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Speaker 4: money to spend, even if the global economy or some
3:01
Speaker 4: indicators are not looking good. But I have to tell
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Speaker 4: you that there are some strange indicators in a way.
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Speaker 4: If you look at the consumer confident in the US
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Speaker 4: is an ultimate law. It's even worse than in the
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Speaker 4: seventies and the eighties, lower than twenty twenty. So people
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Speaker 4: are clearly worried inflation is picking up. But again, when
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Speaker 4: you look at GDP, the normal indicative will look is
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Speaker 4: still very solid, and I think that's what drives market
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Speaker 4: and I think for US, this kind of positive macroathroc
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Speaker 4: is said to continue.
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Speaker 2: Okay, so even with that resilience of the economy, and
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Speaker 2: we know, of course, by the way I mean historically,
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Speaker 2: that is not necessarily the case that economic growth and
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Speaker 2: market returns are correlated. That's not true. It's all about
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Speaker 2: where valuations begin. But even with that economic growth, looking
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Speaker 2: at stock markets, and let's look particularly at the US,
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Speaker 2: there's definitely a valuation problem.
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Speaker 4: Now, yes and no. So it is true that when
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Speaker 4: you look at the for example, the price to any
3:54
Speaker 4: ratio of twenty one, well, it's the long time average
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Speaker 4: is seventeen eighteen. But let's not forget that we have
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Speaker 4: a private sector or a corporate sector is incredibly profitable.
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Speaker 4: You have earnest growth of twenty five percent, record margins, buybacks,
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Speaker 4: taxation effectly going down, model up. So the fundamental story
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Speaker 4: is very, very solid. I wouldn't say that US a
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Speaker 4: market is cheap, but it's not incredibly expensive. And the
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Speaker 4: where I think we see some ara of excessive evaluation,
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Speaker 4: not in the tech sectors, is in stocks in some
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Speaker 4: consumer store the trade well above the market. And I
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Speaker 4: think this is where I think it becomes interesting. Tech
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Speaker 4: looks expensive. But again, if you assume that this kind
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Speaker 4: of Capex story, the AI story will continue, the evaluation
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Speaker 4: is not that extremely And that's why we think that
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Speaker 4: you know, the valuation element is kind of a negative,
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Speaker 4: but not negative enough to upset you know, all the
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Speaker 4: other positive that we mentioned already.
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Speaker 2: Okay, and do we assume that this Capex boom can continue,
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Speaker 2: and we can assume the Capex boom will continue become
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Speaker 2: we assume that returns on it will be what everyone expects.
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Speaker 2: And we've done some podcasts with on AI and on
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Speaker 2: the huge buildout and on the limitations of llms and
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Speaker 2: the possibility that the Capex build out may be something
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Speaker 2: of a false start.
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Speaker 4: I think one, if you look over the next five years,
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Speaker 4: probably I think these numbers cannot be sustained. You know,
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Speaker 4: we're talking about you know, investment in AI in data
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Speaker 4: center clause to one threellion this year in the US.
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Speaker 4: This is cannot go on forever. Can we do expect
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Speaker 4: a significant row down the next six to twelve months
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Speaker 4: when you already had pretty much clear commitment by the
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Speaker 4: top companies that will probably not So I think that
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Speaker 4: the cape story is solid, and I think the question
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Speaker 4: will be will other sector benefit from there? Some industrials,
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Speaker 4: and our view is that this CAPEX story will get
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Speaker 4: a little bit broader and there will support growth for
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Speaker 4: the next at least for the next year.
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Speaker 2: Okay, and then earnings across the board. You said earlier,
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Speaker 2: you know, we have these extraordinary earning numbers, extraordinary margins.
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Speaker 3: They're all at historical hives.
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Speaker 2: And I know that we've all been looking at profs
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Speaker 2: in the US for years and going look at that.
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Speaker 3: They're you know, totally out of wack. This has reverted
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Speaker 3: to mean etc.
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Speaker 2: And they never do but at some point it feels
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Speaker 2: like that should be a turning point.
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Speaker 4: Yeah. I think what it's interesting about margin is that
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Speaker 4: there are an all time I everywhere, even in Europe, UK, Switzerland, China,
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Speaker 4: Japan at the lower level in the US better a
6:18
Speaker 4: time high. So there must be something else, And you know,
6:21
Speaker 4: something else could be real prossing powers. A lot of
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Speaker 4: industry are effectively not very competitive. There are just a
6:27
Speaker 4: few major players that actually can effectively dictate prices. I
6:32
Speaker 4: think they have huge margins. There is a decline I
6:35
Speaker 4: think the in wage costs in a way in real terms,
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Speaker 4: at least there are buybacks as that the help, So
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Speaker 4: it's it's a more fundamental story. I don't think that again,
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Speaker 4: this is unstaindable. At some point, there would be a
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Speaker 4: political backlash, probably because I think people of what will
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Speaker 4: not accept in all these companies to generate a huge
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Speaker 4: amount of profits and when actually a lot of people
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Speaker 4: are struggling. So but it.
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Speaker 3: Feels like that plitical back that's just kind of under way.
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Speaker 4: Yes, but you don't see this translating into let's say,
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Speaker 4: anti business kind of policies, right, And I think that's
7:11
Speaker 4: probably what can change. One could be that global growth
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Speaker 4: would get weaker and profit much will or there will
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Speaker 4: be a change in taxation in the distribution of wealth.
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Speaker 4: But so far it seems a very solid trend which
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Speaker 4: is very difficult to expect to stop. And that's why
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Speaker 4: I think the market is well supported.
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Speaker 2: Yeah, and you believe that there's any examples that we've
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Speaker 2: seen extraordinly aarny numbers we've seen in the US so far,
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Speaker 2: there's yeah that they are sustainable. I mean, because you
7:37
Speaker 2: could argue that that the bubble is not in the
7:39
Speaker 2: p bit of the evaluation.
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Speaker 3: But in the ebit of the valuation.
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Speaker 4: Well, I think, look, when you look at the earnings
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Speaker 4: that we're seeing, you know, tech is up almost fifty percent,
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Speaker 4: but all sectors are up, So is it sustainable at
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Speaker 4: this rate? Now? In fact, we think that the expectation
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Speaker 4: for next year and at the twenty percent case is
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Speaker 4: probably too too high. But again, this year has been
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Speaker 4: in a way exceptional. We expect some deceleration in earnings.
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Speaker 4: We steal earnings that are well above the historical norms.
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Speaker 4: So you need to see more for markets to decline,
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Speaker 4: and probably to see more, you need to see a
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Speaker 4: significant slow down in the global economy.
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Speaker 2: Okay, let's look out over the next decade. We were
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Speaker 2: talking before we started Voice That podcasts. We were talking
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Speaker 2: about forecasts over the next ten years or so, and
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Speaker 2: you were saying that that doesn't look completely comfortable.
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Speaker 4: Well, yes, and in the sense that you know, when
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Speaker 4: we got used to see equity returns between ten and
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Speaker 4: twenty percent, historical average between five and ten and historically
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Speaker 4: when you see very low eupremium as it is now,
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Speaker 4: you cannot expect significant returns in the next five or
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Speaker 4: ten years. So unless we are in a new kind
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Speaker 4: of world with low inflation AI pushing roles to three
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Speaker 4: four percent per random level. I think you need to
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Speaker 4: see at some point some deceleration in the in the returns.
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Speaker 4: What is interesting is that when we look at our
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Speaker 4: indicators in terms of valuation, expected growth, monetary policy, there
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Speaker 4: is a significant convergence across different regions. So we talk
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Speaker 4: a lot about this multipolar and this kind of fragmentation
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Speaker 4: in the geopolitic or the reality is that from a
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Speaker 4: macro point of view, there is actually quite a significant convergence.
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Speaker 4: US is probably gonna get a little bit worse, Europe
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Speaker 4: a little bit better. Valuation has kind of converged, so
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Speaker 4: evaluation is similar in a way as converged, and the
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Speaker 4: global or the macro economic cycles are converging, you should
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Speaker 4: expect returns to be pretty much converging too, but below
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Speaker 4: historical norms. So it's going to be in a way
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Speaker 4: difficult because return will be lower, but I think will
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Speaker 4: be more kind of spread out than now, which is
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Speaker 4: basically driven by the US. So the time where the
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Speaker 4: US was the only place to be invested is probably over.
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Speaker 4: And I think that's the key message for investor in
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Speaker 4: the next in the next decade.
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Speaker 2: Okay, so what does that tell us as ordinary investors?
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Speaker 2: It tells us we should be diversifying away from the US.
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Speaker 2: Does it tell us there are any particular markets we
10:20
Speaker 2: should be heading for.
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Speaker 4: Yeah, you have to vercify away from the US, not
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Speaker 4: only because not because we expect US talks particularly badly,
10:28
Speaker 4: but because of risk consideration. So if you are passively invested,
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Speaker 4: let's say you're based in the UK, you're passively invested,
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Speaker 4: you end up having seventy percent almost of your asset
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Speaker 4: in a market that is not even denominating your own currency.
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Speaker 4: So there is a risk market risk, currency risk, political risk.
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Speaker 2: Sectly risk, because so much of that is in the
10:47
Speaker 2: text acutally dominated exactly.
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Speaker 4: So I don't think it's worth taking this kind of risk.
10:51
Speaker 4: So I think having a more equal weight approach reconsider
10:54
Speaker 4: your location and to a maybe even un biased, I
10:57
Speaker 4: think it would help. And also, let's not forget that
11:00
Speaker 4: when you look at the as an investor, we tend
11:02
Speaker 4: to focus on equities because that's where they tend to
11:04
Speaker 4: get the best returns. But now if you look at
11:07
Speaker 4: the where bonills are in the UK but also in
11:10
Speaker 4: the US, you know you start thinking that you can
11:12
Speaker 4: probably also maybe take some profit back and put it
11:15
Speaker 4: into fixed income because I think now for the first
11:18
Speaker 4: time I would say in a decade, the expected returns
11:22
Speaker 4: on fixed inco and product actually quite attractive, not only
11:25
Speaker 4: in the UK, also in the US. So I think
11:27
Speaker 4: maybe it's time also to put some money back into
11:29
Speaker 4: the fixeding comes.
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Speaker 3: You can say, quite brave to get into the UK
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Speaker 3: bob market right now, you.
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Speaker 4: Know, it's always just a difficult part of our job,
11:36
Speaker 4: right I think when you look dood at the UK,
11:39
Speaker 4: you look at the guilt yields between five and six
11:42
Speaker 4: in real terms, its like India, so the effectively it's
11:45
Speaker 4: the same real yield that you have in India. And
11:47
Speaker 4: if you look at the you know, even the the
11:50
Speaker 4: everybody's talking about, you know, the problem of debt. You
11:54
Speaker 4: know the fiscal situation. And I'm not taking my numbers,
11:57
Speaker 4: take the number of the IMF. The UK is a
12:00
Speaker 4: much better position, definitely in the US, even Europe. According
12:04
Speaker 4: to the MF, not myself, the UK will have a
12:06
Speaker 4: primary budget surplus in two years time. Maybe it's not
12:10
Speaker 4: going to happen. The point is the fiscal situation the U.
12:13
Speaker 4: In the UK, it is not fantastic, but it's not
12:15
Speaker 4: as bad as everybody think it is. So I think
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Speaker 4: there is some good value guilds the timing.
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Speaker 2: It's just perceived as bad because no one quite believes
12:23
Speaker 2: that that fiscal surplus will exist based on current policy.
12:26
Speaker 4: Because of political instability. You don't know it's going to
12:28
Speaker 4: be in charge. Obviously, that's you pay the price for that.
12:31
Speaker 4: But the point is that when you look over the
12:33
Speaker 4: next ten years, there are a lot of political cycles.
12:36
Speaker 4: I think there is still good value in UK, in
12:39
Speaker 4: UK bonds okay.
12:40
Speaker 3: And in equities. Is there anny market that stands out.
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Speaker 4: To you well? When we look at now, I think
12:45
Speaker 4: the US is still the best bet. Again, you have
12:49
Speaker 4: a good economy, you have probably potentially some rat cuts,
12:52
Speaker 4: earnest growth at twenty five percent. I think everything seems
12:56
Speaker 4: to be going well for the US. Emergy is true,
13:01
Speaker 4: and this is not just Korean Taiwan. I think we
13:05
Speaker 4: see a decent improvement in emerging market smer market already
13:08
Speaker 4: cutting rates, good valuation chip currencies. So I think it's
13:12
Speaker 4: it's EM and US and now the place to be
13:15
Speaker 4: if you extend your analysis over the next five to
13:17
Speaker 4: ten years. There is also a case for Europe. You know,
13:20
Speaker 4: Europe is kind of especially Germany, it's going to spend more,
13:24
Speaker 4: you know, cheap valuation. I think we also feel more
13:27
Speaker 4: optimistic than others on the integration story reforms. It's difficult
13:33
Speaker 4: to invest in Europe, we know, but I think if
13:35
Speaker 4: you're standing your analysis, I think everything seems to be
13:38
Speaker 4: going very is learning Europe in the right direction, and
13:41
Speaker 4: I think the market is not the kind of priceful
13:44
Speaker 4: for that improvement.
13:45
Speaker 3: We're all just the branch about Europe and the UK.
13:48
Speaker 4: Yeah, because actually the history tells you that it's not
13:50
Speaker 4: worth investing in Europe. But you know, at some point
13:53
Speaker 4: things will change. And in fact, when you look at
13:55
Speaker 4: the performance of euro versus the US, but if the
13:58
Speaker 4: UK locally, the past five years a big difference. So
14:01
Speaker 4: I think it's important to highlight that, you know, not
14:04
Speaker 4: everything is better in Europe. But obviously, you know there
14:07
Speaker 4: is a reason why Europe and the UK trade a
14:09
Speaker 4: significant discount to the US. We just think that this
14:12
Speaker 4: kind of discount is a little bit too wide.
14:15
Speaker 3: And thinks should change for the best.
14:16
Speaker 2: What about commodities, I mean, obviously the energy marketers have
14:20
Speaker 2: great interest to everybody at the moment, but across the
14:22
Speaker 2: board there's renewed interest in the commodity sector and talk
14:25
Speaker 2: of a new super cycle and commodities, et cetera. A
14:28
Speaker 2: lot of our listeners are particularly interested in gold.
14:31
Speaker 4: I don't believe in a commodity supercycle. If you look,
14:34
Speaker 4: the last one was riven by a huge increase in
14:37
Speaker 4: investment in China, especially in the real estate, which is
14:41
Speaker 4: very commodity intensive. The current capex cycle is this less
14:45
Speaker 4: kind of commodity intensive. You still need, especially industrial metals,
14:50
Speaker 4: not by a chance industry metal strad and all time high,
14:53
Speaker 4: so you have to be differentiated. I think the gold
14:55
Speaker 4: price is set to increase, not at the same pace. Know,
15:00
Speaker 4: the dollars already appreciated a lot, there is limited downside
15:04
Speaker 4: and rates if the geopolitical situation improved. I think gold
15:08
Speaker 4: still has the potential to do well, but not at
15:11
Speaker 4: the same pace of the last few the last few years,
15:13
Speaker 4: the old pride thing is trending down unless something goes wrong.
15:18
Speaker 4: Obviously in the Middle East, where I think the most
15:22
Speaker 4: interesting bit on the commodity side is industry metals, because
15:26
Speaker 4: I think you can claim that industry metals are critical
15:30
Speaker 4: in the green transition, there is limited supply, a strong momentum.
15:35
Speaker 4: That's probably the air of the market, which I think
15:37
Speaker 4: is more interesting. But betting on a commodity supercycle when
15:41
Speaker 4: grossy is okay man not booming, I find it difficult.
15:45
Speaker 4: But at the same time, with all our kind that
15:47
Speaker 4: a position in commodities is required, special in gold because
15:51
Speaker 4: if there is a spiking inflation, you still want.
15:54
Speaker 2: A to it.
15:55
Speaker 4: Yeah, yeah, I mean, it's it's it's something that you
15:57
Speaker 4: know sometimes when you look at your perform you don't
16:00
Speaker 4: want to just pick the asset class they will do
16:03
Speaker 4: necessarily be the best, but the one that can give
16:05
Speaker 4: you some protection something goes wrong, and I think commodities
16:09
Speaker 4: I think fit this kind of description.
16:12
Speaker 2: Yeah. I So when we were talking earlier about Europe
16:14
Speaker 2: and the UK and reasons people don't feel particularly comfortable investing,
16:17
Speaker 2: and one of the reasons that people often give them
16:19
Speaker 2: part is because of the extremely expensive energy prices in
16:22
Speaker 2: European in the UK, and that makes it very difficult
16:25
Speaker 2: to think, well, these are places that are going to
16:27
Speaker 2: grow incredibly fast in the future of economic activity.
16:30
Speaker 3: Is energy transformed, etc. Is germanly really the place to be?
16:33
Speaker 2: Is UK really place to be because it's hard to
16:35
Speaker 2: see great growth on the back of that kind of price.
16:38
Speaker 4: Well, I mean, Europe roughly imports three percent of GDP,
16:42
Speaker 4: so that's the cost of the import bill in terms
16:45
Speaker 4: of in terms of energy, so three percent GDP is significant.
16:48
Speaker 4: The US is an ect exporter one. There is one
16:51
Speaker 4: positive element to all this. First of all is that
16:53
Speaker 4: we expect first of all oil prices to decline, but
16:56
Speaker 4: also the fact that renewables are a much bigger role.
17:01
Speaker 4: That means that Europe slowly, with time, potentially by two
17:04
Speaker 4: thousand and forty will be energy independent.
17:06
Speaker 3: Assuming battery technology everyone.
17:10
Speaker 4: I mean it's two thousand and twenty six. Two thousand
17:12
Speaker 4: and four is a long time, but I think Europe
17:13
Speaker 4: is going in the right direction. My worried about Europe
17:17
Speaker 4: is that this process of there are also on real reforms.
17:21
Speaker 4: Another example, you look at the periphery today looks even
17:24
Speaker 4: more solid than the core. So we tend to forget
17:26
Speaker 4: that Europe has a lot in the last decade, but
17:29
Speaker 4: it's still too slow. There is that I see for
17:31
Speaker 4: Europe Party in the UK that you need another existential
17:36
Speaker 4: crisis for the actual reform to be implemented and Awfully,
17:40
Speaker 4: it's not going to happen. But that's my worry that
17:43
Speaker 4: we are still too comfortable in Europe and the UK
17:46
Speaker 4: to make the decision that we have to make again.
17:49
Speaker 4: I hope that you're going the right direction without a crisis,
17:52
Speaker 4: but I feel that we need maybe more.
17:54
Speaker 2: My life, existential crisis and physical crisis, presumably of some
17:58
Speaker 2: kind of the UK.
17:59
Speaker 4: I don't know, because again the UK, of course, it's
18:02
Speaker 4: all about the political the political environment, because the UK
18:06
Speaker 4: we are very dependent on foreign capital, something that Europe
18:09
Speaker 4: is not, for example. But at the same time, I
18:13
Speaker 4: feel that the real risk for scal risk is more
18:15
Speaker 4: in the US when you have people tend to forget that.
18:18
Speaker 4: In the especially in the euro area, the debt to
18:21
Speaker 4: GDP ratio is the same as ten years ago in
18:23
Speaker 4: the US is twenty percent higher. The US is where
18:25
Speaker 4: you see an exponential increase in public debt, not in Europe.
18:30
Speaker 4: In Europe the promise that we don't spend well what
18:33
Speaker 4: we have in the US there is an exponential trend
18:36
Speaker 4: that there is no sign of this being changed. So
18:40
Speaker 4: I think of the US, because you have the dollar,
18:43
Speaker 4: there is a currency, there's still a lot of capital
18:46
Speaker 4: inputs into the US. But this is where I think
18:49
Speaker 4: the risk are more in the US than in Europe
18:50
Speaker 4: from a fiscal.
18:51
Speaker 3: Polity anything that. I mean, you and i've had this
18:53
Speaker 3: conversation before. We've been worrying about this in the US
18:56
Speaker 3: for decades, decades, and it just keeps going. It's fine,
19:02
Speaker 3: So why would.
19:02
Speaker 2: We were now?
19:04
Speaker 4: Because the US is less. You can't trust the US
19:08
Speaker 4: in the sent where you trust the US a few
19:09
Speaker 4: years ago, and when you're very dependent on foreign coup
19:13
Speaker 4: that's throws over the UK. You cannot treat foreign investors
19:18
Speaker 4: in the wrong way. And that's the percept, the percept
19:20
Speaker 4: the US is not the safest place. It's still the safest,
19:24
Speaker 4: the best place, but not as good as it was before.
19:27
Speaker 4: And so I think if you just again we talk
19:29
Speaker 4: about the diversification, even if a small portion of foreign
19:33
Speaker 4: investors are diversify away from the US, this is a
19:35
Speaker 4: huge implication in terms of one yields evaluation of equities.
19:39
Speaker 4: We don't expect anything crazy, but we think that the
19:42
Speaker 4: we already seen the peak of exceptionalism and the US
19:46
Speaker 4: will I think already lose some the dominant position in
19:49
Speaker 4: a lot of areas, right and so I think that
19:52
Speaker 4: that's what can trigger potentially and we don't expect the
19:56
Speaker 4: US ITS investors getting worried about a dollar depreciation, the
20:01
Speaker 4: federal or the fat tools independence. This could be a
20:04
Speaker 4: significant trigger for potentially a physical crime. We don't see
20:08
Speaker 4: this happening, but you know, that's one of the risks
20:10
Speaker 4: that we have for our in our second outomes.
20:12
Speaker 2: Okay, I was going to ask you what you thought
20:13
Speaker 2: the biggest risk was out there, and I suspect that
20:15
Speaker 2: that's the one.
20:16
Speaker 4: Yes, yeah, sorry, yeah.
20:19
Speaker 2: So leaving that, what what is the thing that you
20:22
Speaker 2: think might happen that might make everything absolutely fine, justify
20:25
Speaker 2: valuations across the board. Maybe these physical problems go away.
20:29
Speaker 2: I mean, we often hear from people, but we don't
20:30
Speaker 2: worry about anything anymore. Because the arrival of AI and
20:33
Speaker 2: robotics are going to bump up productivity so much all
20:36
Speaker 2: the problems that you thought we had are going to vanish.
20:39
Speaker 4: Well, I mean, there will always be problems, right I think.
20:42
Speaker 4: I think to me as an investor, the word that
20:45
Speaker 4: I have there is always something happening that we can
20:47
Speaker 4: we can predict. These are the real problems, the one
20:51
Speaker 4: that we're not prepared. We are kind of prepared for
20:53
Speaker 4: US packing inflation. We are prepared for some kind of
20:56
Speaker 4: physical criss We are prepared for a scally in the
21:00
Speaker 4: middle list. We are not prepared for COVID for example.
21:03
Speaker 4: This is the kind of things where when honestly, when
21:06
Speaker 4: I look at the fundamental is one risk that I
21:08
Speaker 4: see for for global market is that we are in
21:12
Speaker 4: a way too dependent in terms of well creation of
21:16
Speaker 4: what the stock market is doing. So it's for whatever reason,
21:20
Speaker 4: and we see actually life with the eye, there is
21:22
Speaker 4: a disruptive force that can potentially create a big shock
21:26
Speaker 4: in the market that will have a huge implication also
21:28
Speaker 4: for growth. So in a way, the correlation has changed.
21:31
Speaker 3: Is the way around? Now that's to me, and this.
21:35
Speaker 4: Can happen on a daily basis, and we kind of
21:38
Speaker 4: predict that That's what I'm really worried about, some more
21:41
Speaker 4: market shock affecting the global economy. That the way around.
21:45
Speaker 2: Okay, all right, generally speaking, you're relatively optimistic that everything
21:49
Speaker 2: will hold together, but we'll see just lower lower returns
21:51
Speaker 2: over the next ten years that we have over the.
21:54
Speaker 4: Previous Yeah, we had basically ten or twenty years of
21:57
Speaker 4: superior returns. I think this is not going to happen again,
22:00
Speaker 4: and you go if you have you know, seven percent
22:02
Speaker 4: return on equities and inflation is three. It's not bad,
22:06
Speaker 4: it's just that it's not We shouldn't get used to
22:08
Speaker 4: twenty percent because that's not sustainable. If it happens, you know,
22:12
Speaker 4: what happens is the inequality rise and the risk of
22:15
Speaker 4: economic populism would grow. So I don't think it's actually
22:18
Speaker 4: good for us as society to have a long period
22:22
Speaker 4: of superior kind of return from acty because these would
22:25
Speaker 4: generate political political tensions.
22:27
Speaker 2: Yeah, we want better GDP growth put ahead and maybe
22:30
Speaker 2: less growth in the stock market. Yeah, look, I thank you.
22:33
Speaker 2: Can I ask you just before we go? I previously
22:36
Speaker 2: I used to always ask people whether if they were
22:37
Speaker 2: given a choice between gold or bitcoin, they would which
22:40
Speaker 2: one they would take. But I'm slightly given up on
22:41
Speaker 2: that one now because everyone always chooses gold. But I
22:43
Speaker 2: just want to check, would you choose gold?
22:45
Speaker 4: Would still I still believe that bitcoin is a lottery
22:48
Speaker 4: ticket you can win a lot three, but I think
22:51
Speaker 4: coneverage you don't. But I can't blame any one if
22:53
Speaker 4: they want to put some of their kind of safety
22:56
Speaker 4: in bitcoin. But I still think that gold is the
22:58
Speaker 4: winner here.
23:00
Speaker 3: Thank you very much.
23:01
Speaker 4: Thank you.
23:11
Speaker 3: Thanks for listening to this week's Marin Jogs Money.
23:13
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23:15
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Speaker 2: marinas w and John is John Underscore. This episode was
23:27
Speaker 2: hosted by Me Marren Sumset webs produced by some Aersaidi
23:30
Speaker 2: and Moses and with help from Jessica Beck. Sound designed
23:34
Speaker 2: by Blake Naples and Aaroncasper. Special thanks to Luca Perlini.